So let’s jump right into it. The first topic we will discover is something everyone talks about now, with everything happening politically in the US and around the world. Dubai is experiencing something, an anticipation of a bubble bursting. There’s a lot of talk about a recession, how it’s going to affect Dubai, and how prices are going to drop. We wanted to get your outlook on the situation. What’s happening? What do you think is going to happen?
Understanding Dubai’s Real Estate Growth Unprecedented Boom
There are quite a few things we can address here. First, if you read the KH Times, they said Dubai is experiencing an unprecedented boom. The key word here is “unprecedented,” meaning the boom that Dubai is going through has never been experienced before. This means a different set of criteria must be applied to understanding this boom. People who historically look back to 2008 and 2014 will be left disappointed. In fact, last year, people kept saying that prices had not yet peaked to 2014 levels. We peaked at the beginning of June, three months ago, and prices are still going up, not coming down.
The Changing Property Cycle in Dubai
Something has changed about Dubai and the property cycle we are in. People can no longer look backwards historically to predict Dubai’s future. Historically, once prices reached a peak, there would be a correction, and then you get two to three years of a downturn. We had that from 2017 to 2019 when 38% went out of the market. But people are forgetting that you’re looking at Dubai of 2024 and comparing it to Dubai of 2014.
Historical Context vs. Present Dynamics
In 2014, when you had all those launches from 2011, 2012, and 2013, and when those started handing over, you had a lot of units in the market, but you did not have that many buyers, and developers stopped launching. We never had a golden visa in 2014. Now, with the golden visa at 2 million and even applying at 1 million, it automatically makes a lot more people interested in picking up property because 2 million is affordable today. We never had the D33 agenda of Sheikh Mohammed, where he was looking to double the economy in 10 years. We did not have the anticipated population growth by 2.5 million in the next 10 years. We never had District 2020 or the commercial gaming licenses to bring a whole new wave and trend of people into the city. We never had the Dubai Urban Master Plan of 2040, aiming to make Dubai the number one city on the planet.
Current Economic and Real Estate Trends
To sit in 2023 and 2024 and look at what happened in 2014 and 2015, people are using the wrong yardstick. We need to understand the current dynamics of Dubai. Yes, globally, there is a challenge facing real estate and economies, but that is not happening in Dubai. How is it possible that this city is going in a different direction compared to the rest of the world?
Economic Recession and Dubai’s Resilience
Once we understand that clearly, most of these concerns that people have raised disappear. Let’s talk about the economic recession. Economies are struggling worldwide. Last year, the global average GDP projection was 2.7%, revised down to 2%, but Dubai’s GDP was increased to 4.1%. The two economies doing really well last year were China at 5.5% and India at 4.5%, and now you had the UAE at 4.1%, while the US was at 1.3%. You have this little Arab state competing with giants like India and China. China is struggling now, but they’re still almost two and a half times the world average. We’ve also been classified as the second most stable economy in the world, according to the US News and World Report last October, with Singapore being the first.
Ambitious Growth Plans
You have the second most stable economy, one of the highest GDP growth rates, and a government vision to double the economy in the next 10 years, taking it from 14.2 trillion AED to 26.2 trillion AED. There’s no city on the planet with such an ambitious growth plan.
The Misconception of a Bubble
Let’s talk about the bubble. Most people who say Dubai is a bubble don’t understand what a bubble is. When I train my clients or talk to them, I ask them to define what a bubble is, and most of them can’t answer. A bubble is when any industry, not just real estate, sees prices consistently rising quickly over a sustained period, while the economy is flatlined or has marginal growth. The industry pulls away from the city’s economic performance, and at one point, it becomes too expensive, and people pull out.
Real Estate and Economic Synergy
Dubai has had consistent, quick price increases since 2020, but you cannot separate the real estate market from Dubai’s economic agenda. When you’re looking to double your economy, infrastructure is part of that growth. You need office spaces, warehouses, residential communities, villas, hotels, malls, retail, entertainment, and nightclubs to sustain that growth. It’s natural that real estate prices are going skyward as part of the economic agenda.
Housing Shortage and Population Growth
Every major newspaper carried it last year, saying Dubai would face a housing shortage in both the ultra-high net worth and affordable categories. We have around 100,000 units handing over from 2023 to 2028, averaging around 20,000 units per year. Still, we need 50,000 new homes each year for the next 10 years due to the population growth.
Rental Market Dynamics
With population growth, rental demands go up. Rents have increased 42% in the last three years, with a 20% projection this year. This is due to new population inflows and rental migrations. Millionaires are coming to Dubai, pushing rental prices up.
Disproving the Bubble Theory
When prices and rents are going up, the population is growing, and there’s a strong economic agenda, how is it possible to have a bubble? All the global reports have put Dubai in the green for this year, with one of the highest growth rates in the world. Real estate predicts 15% growth this year. Every single developer is launching new projects. Emaar, with 23 years of experience, and others are launching because they see the future and understand the economic agenda of Dubai.
Developers’ Confidence in the Market
The projects launched in the last three years will be absorbed by 2028, and we will need more homes. This is why developers are launching new projects. Everything is selling out. We had 120,000 millionaires and billionaires invest 429 billion AED last year in Dubai.
The Role of Brokers and Salespeople
It’s not the investors; it’s the brokers or salespeople who don’t understand the city and its future. Real estate is about the future, and we need to understand the government’s plans and the city’s development.
UBS Global Real Estate Bubble Index
Once explained to clients, they understand there’s no bubble. The UBS Global Real Estate Bubble Index measures bubble risks across the top 25 cities. Dubai is in the green, one of the safest cities to buy. The source is the Union Bank of Switzerland, handling $4.1 trillion worth of investments annually. There’s nothing to suggest a bubble in Dubai.
Dubai’s Unique Real Estate Cycle
Regarding the cycle period, Dubai is breaking the traditional cycle. Typically, a cycle would go down and start again. In Dubai, the cycle is going up. Just when it’s ready to flatten, new initiatives are announced. This keeps demand high and prices stable. Dubai’s cycle is now a series of upward trends, starting from a higher point each time due to new initiatives like 10-year visas, District 2020, and retirement plans.
The Impact of Casino Development in Ras Al Khaimah
The casino development in Ras Al Khaimah (RAK) is another example. RAK had a good run with the Wynn casino announcement, attracting investors and increasing property values. But now, with Dubai announcing new casino projects, the focus is shifting back to Dubai. Dubai offers more infrastructure, lifestyle, and business opportunities. While RAK will benefit, Dubai will remain the main attraction due to its comprehensive offerings.
Future of Luxury Real Estate in Dubai
Luxury real estate in Dubai will continue to grow for the next 10 years. Global brands are associating with developers, indicating a strong market. Millionaires and billionaires see Dubai as a safe haven with tax benefits and high-quality real estate. The Top Move study showed UAE has the lowest emigration rate, meaning people are staying despite rising rents.
Dubai’s 2040 Urban Master Plan
Dubai’s 2040 Urban Master Plan aims to make Dubai the best city in the world by 2040. The city is divided into five major areas: old Dubai (cultural heritage), the business hub (downtown and DIFC), the waterfront (JBR and Marina), Dubai South (exhibitions and commercial use), and Silicon Oasis (technology and innovation).
The D33 Economic Agenda
The D33 economic agenda aims to double the economy in 10 years, opening new economic corridors to Southeast Asia, Africa, and Latin America. Dubai plans to double foreign direct investments and add 400 more cities to its trade map. The city is targeting top universities and has a Greenfield investment strategy, attracting significant investments.
Dubai vs. Saudi Arabia
Saudi Arabia is making strides but is still 20 years behind Dubai in terms of infrastructure and lifestyle. While Saudi is investing heavily, Dubai’s vision and strategic initiatives keep it ahead.
Renewed Interest from China
China is back, with significant investments like the Yiwu Market, showing confidence in Dubai. Chinese buyers are returning, and the partnership with China in BRICS will drive more investments.
Final Lines
In summary, Dubai’s real estate market is supported by a strong economic agenda, significant infrastructure development, and strategic initiatives, ensuring sustained growth and mitigating bubble risks.
FAQs
- What is driving Dubai’s real estate boom?
Dubai’s real estate boom is driven by a combination of economic growth, strategic government initiatives, population inflows, and strong infrastructure development. - Is there a real estate bubble in Dubai?
No, the current market dynamics and economic agenda in Dubai suggest sustained growth rather than a bubble. - How is Dubai’s property market different from 2014?
The market in 2024 is influenced by factors like the golden visa, the D33 economic agenda, and significant population growth, unlike in 2014. - What are the future prospects for Dubai’s real estate market?
The future looks promising with continued growth in luxury real estate, new projects, and strong investor confidence. - How do global economic trends impact Dubai’s real estate?
Despite global economic challenges, Dubai’s unique growth strategies and stable economy provide a buffer against adverse global trends.
