Two Key Drivers Sustaining Dubai’s Strong Real Estate Market

Dubai's real estate market continues to show resilience and strength, fueled by two key drivers: sustained demand and the effects of inflation. With a year-on-year growth rate of 16.73%, the market is attracting both end-users seeking a new home and investors looking for a hedge against inflation.

So, what are the two key factors contributing to Dubai's strong real estate market, attracting both residents and investors? Let's dive into it.

Sustained Demand

One of the primary factors bolstering the Dubai real estate market is the persistent strong demand. This demand has been capable of absorbing the available supply, a trend expected to continue as numerous off-plan projects reach completion. The handover phase of these projects, projected to begin heavily in Q1 2025, will be a critical period. 

The optimistic outlook hinges on Dubai's established reputation as a premier global destination, attracting new residents, tourists, and both individual and institutional foreign investors. This sustained influx is anticipated to keep demand levels high. Even in scenarios where demand may slightly lag behind supply, any resulting imbalance is expected to be temporary and manageable in the medium term.

Impact of Inflation

The second significant factor is inflation. With cash losing value globally, including in Dubai, individuals are increasingly seeking to safeguard their wealth by investing in assets that protect against inflation. Real estate emerges as a preferred choice due to its tangible nature and relative ease of understanding. Once basic research and due diligence are completed, many find real estate investments to be a secure and comprehensible asset class.

Properties in Dubai, which cost a certain amount today and were constructed at lower costs in the past, are likely to appreciate in value. This is because the cost of building new properties continues to rise due to inflationary pressures on construction materials, logistics, and other related expenses. Consequently, property owners find it prudent to invest their money in real estate, recognizing that replacement costs will only increase in the future.

Current Market Dynamics

Currently, Dubai’s market for rental properties, ready-to-buy properties, and off-plan properties appears healthy. While the extraordinary capital gains witnessed over the past two years may not persist, steady and healthy growth is anticipated. This stability reflects the underlying strength of Dubai's real estate market and its ability to adapt to evolving economic conditions.

In summary, the combination of robust demand and strategic responses to inflation ensures that Dubai’s real estate market remains vibrant and attractive to a diverse range of investors. This dynamic interplay continues to position Dubai as a leading global real estate hub.

The data of Q1 shows a clear growth over the past three years, number of sales transactions in Q1 2024 (65,450 transactions) is double the number of transactions in Q1 2023 and triple the number of transactions in Q1 of 2022. And so the value of sales transactions is 186 billion in Q1 2024 vs less than 150 billion in Q1 2023 and only 90 billion in Q1 2022.