2022 Year in Review - The Golden Year for Dubai Real Estate

Last year in Q1, I forecasted a strong 2022 in Dubai’s real estate market off the back of 2021, which turned out to be the foundation and laying blocks for the coming year ahead. The biggest point, which became clear when I was forecasting 2022, was the government’s involvement in shaping the overall economy. What we saw throughout Covid, of the government’s proactive measures, was remarkable to say the least and they continued to drive forward their visions and plans in 2022. Due to this and several other factors, 2022 turned out to be the best recorded year in Dubai’s real estate market history. 

It was the year where the secondary market dominated, prices increased in some areas by over 100%, demand exceeded supply significantly, crypto made its way into the luxury market, high net worth individuals (HNWI) were lured by Dubai’s attractive business environment and high standard of living, tenants were hit with quick, rising rents, interest rates rose to the highest level in 15 years, the government released new visa reforms and the list goes on and on.

It also needs to be noted that in 2022 we saw nationalities invest in Dubai real estate that weren't in the top 10 traditionally. We saw investors come heavily into the market from Italy, Germany, Australia, USA, Switzerland, France and Russia. According to Allsopp & Allsopp Group buyer data, the top buyers in 2022 were British at 21.2%, Indians at 11.9%, France at 4.2% and Russian at 3.7%.

All of these factors, along with global and local macroeconomic factors, is what made 2022 the ‘Golden Year of Real Estate’ for Dubai.

To expand further, Dubai's population grew by 2.1% in 2022 to 3.55M people spurred by job growth in diverse sectors mainly travel and tourism, hospitality, real estate, aviation and MICE (Meetings, Incentives, Conferences and Exhibitions) sectors and the growth from 2020 to 2022 was 4%. In addition, massive visa reforms by the UAE government enticed businesses and individuals alike to make Dubai their new home. 

The visa system reform was probably one of the biggest efforts by the UAE government in 2022, where several different types of visas were introduced such as the golden visas, green visas and freelance visas making it easier for one to call Dubai home. In addition, 100% foreign ownership of companies was in full swing which boosted the startup ecosystem and brought in a high amount of foreign direct investment (FDI), putting the UAE first in rank for FDI inflows in West Asian countries, with an impressive FDI growth rate of 4%. This, coupled with political stability, a stable economy, high standard of living, exceptional quality of life, ease of company setup, tax advantages and over 40 free zones made Dubai a sweet spot for investors, tourists and new residents.  

Due to the population increase and increased economic activity, Dubai’s GDP expanded by 4.6 per cent in the first nine months of 2022 to Dh307.5 billion, thanks to the diversification of the economy and proactive government efforts. According to the World Bank, UAE GDP is set to grow by 4.1% in 2023 which is higher than the 3.9% predicted by the UAE Central Bank in its Q4 quarterly report. 

Dubai was also a destination hot spot for tourists and was named Tripadvisor's top destination in the world for 2022. Dubai hosted 12.82 million overnight international visitors in the first 11 months of the year, which is more than double the 6.02 million visitors during the same period in 2021 and 85% of the pre-Covid levels during the same period in 2019. In addition, hotel occupancy hit 71% in the first ten months of 2022 according to data from Dubai’s Department of Economy and Tourism. Also, one must not forget that Dubai gets an estimated one million visitors a day from other Emirates for business and tourism.

Dubai Real Estate Sales 2022 Transactions Overview

In 2022, Dubai had 97,398 total real estate sales transactions worth AED 265.4 billion according to the open data from Dubai Land Department. This is the highest sales transactions and value ever recorded since the Dubai Freehold Decree was introduced in 2002 and a significant year-on-year increase of 60.75% in sales transactions volume and 76.88% increase in sales value compared to 2021. To put it into further perspective, when compared to 2020, we saw a 182.6% increase in sales volume and 273% increase in sales value. The second highest year last recorded was in 2009 for both volume and value of 91,248 and AED 153.6 billion respectively.

Domination of the secondary market

The secondary/ready market dominated 2022 taking 55% of the total transaction volume with 53,509 sales transactions and 64% of the total transaction value worth AED 170.7 billion. Even though the amount of new projects launched in 2022 were 54% more than 2021 new project launches, buyers were looking for ready property. This can be attributed to many factors including a notable increase in off-plan pricing. The average sales price for off-plan in 2022 was AED 2.2M which is an increase of 17% compared to 2021, and the average price per square foot was AED 1,820 which is an increase of 18% year-on-year. Needless to say, developers were taking into account the supply chain issue, lack of and the rising cost of construction material along with inflation worries when new launches were priced in 2022. 

In addition, 2022 continued to see end-user, home buyers similar to what we saw in 2021 and these end users wanted a property to live in, with immediate effect, in the secondary market. Rising rents also played into the equation as rents rose exponentially and became much more expensive compared to a mortgage on the same property, therefore many turned to purchase in the secondary market. 

Return of the apartments

While in 2021, we saw a very prevalent trend of residents moving into the suburbs of Dubai to enjoy the sprawling, master planned villa communities, pools and gardens. In 2022, we saw a migration back into the city, specifically into apartments which is primarily due to affordability as prices started to rise across Dubai, with the highest increase in the villa/townhouse segment. In 2022, 68% of sales transactions were for apartments while 24% were for villa/townhouse. Developers quickly took note of this, and with much greater agility than in the past, they quickly pivoted to apartments with 82% of the new stock in 2022 being apartments. 

Popularity vs growth vs affordability vs high-end luxury

The total average sales price for an apartment in 2022 was AED 1.9M, up 16% year-on-year compared to 2021. For villa/townhouses, the total average sales price in 2022 was AED 3.65M which is 20% higher year-on-year when compared to 2021.

Interesting to note, 50% of the total sales transactions recorded in 2022 were in the price bracket of AED 1M to 3M and the next most popular range was between AED 500k to 1M that made up 19% of the total transactions, which puts an emphasis on affordable housing. This was followed by the range of AED 3M to 5M which were 12% of the total transactions. 

Growth in villa/townhouses prices

The top areas where we saw the most popularity in year-on-year growth in average sales price for villa/townhouses in 2022 compared to 2021 were Tilal Al Ghaf with a 147% increase in average sales price, Emirates Living with an 80% increase, Palm Jumeirah with a 78% increase, Victory Heights with a 73% increase and Jumeirah Village Circle with a 67% increase in average sales price year-on-year. 

When it comes to the high-end luxury market, the three most expensive villas sold in 2022 were on the Palm Jumeirah for AED 600M, AED 302.5M and AED 280M.

When it comes to affordability, there are areas where deals can still be had. The top five most affordable villa/townhouse communities in 2022 were:

Growth in apartment prices

The top areas where we saw the most popularity in year-on-year growth in average sales price for apartments in 2022 compared to 2021 were Jumeirah Bay Island with a 96% increase in average sales price, Remraam with a 54% increase, Jumeirah Lake Towers with a 43% increase, La Mer with a 42% increase, Bluewaters with a 42% increase, Jumeirah Village Triangle with a 40% increase, Al Barari with a 35% increase, Emirates Living with a 33% increase and Palm Jumeirah with a 31% increase in average sales price year-on-year.

The three most expensive apartments sold in 2022 were The Royal Atlantis on the Palm Jumeirah for AED 163.4M, Jumeirah Living Marsa Al Arab for AED 145M and Jumeirah Bay Island Bvlgari for AED 133.15M. 

Dubai Rental Market - EJARI Registrations

You can’t talk about the 2022 Dubai real estate market without talking about the rental trends and how rents quickly accelerated throughout the year. The hot rental trends can be attributed to several factors such as the growth in population, new visa reforms which now make it easier to visit Dubai on a tourist visa for 60 to 90 days to explore opportunities, high demand/low supply, the rise of interest rates and the Russian - Ukraine conflict. 

Over the last year, interest rates rose to the highest level in 15 years which priced many prospective buyers out of their price range and prompted them to continue to rent rather than buy. In addition, we saw an influx of tourists and potential new residents into the Emirate who needed a rental, rather it be a long term or short term rental. Just like in the sales segment, supply was snapped up quickly, prices started to rise significantly and quickly especially in prime, popular areas. 

In 2022, there were a total of 694,374 EJARI rental registrations which is 4% less than the total for 2021. It is interesting to note that 55% of total rental contracts in 2022 were new contracts whereas 45% were renewals. This is most likely due to tenant's relocating to more affordable locations due to increased rental prices. Apartments were the most popular rentals with 83.5% of the total contracts and villa/townhouse with 8.4% of contracts. 

Popular areas for apartment rentals

The top areas for apartment rentals in 2022 were Discovery Gardens, Al Furjan, Jumeirah Village Circle, Dubai Marina, Jumeirah Beach Residence, Bluewaters, Dubai Harbour, International City, Dragon City, Dubai Silicon Oasis, Business Bay, Downtown Dubai, Dubailand Residence Complex and Remraam. 

The top areas where we saw the most popularity in year-on-year growth in average rental prices for apartments in 2022 compared to 2021 were Downtown Dubai with a 24% increase in rental prices year-on-year, Dubai Marina with a 19% increase, Palm Jumeirah with a 17% increase, Town Square with a 17% increase and Jumeirah Lake Towers with a 15% increase year-on-year. 

Popular areas for villa/townhouse rentals

The top areas for villa/townhouse rentals in 2022 were Damac Hills 2 - (Akoya Oxygen), Emirates Living, Rukan, Arabian Ranches 2, Serena, Reem, Town Square, Dubai Hills Estate, Al Furjan, Arabian Ranches 1 and Jumeirah Village Circle.

For villa/townhouses, the top areas where we saw the most year-on-year growth in average rental prices in 2022 compared to 2021 were Dubai Hills with a 30% rental increase year-on-year, Damac Hills with a 21% increase, Jumeirah Village Triangle with a 16% increase, Arabella in Mudon with a 15% increase, Jumeirah Village Circle with a 15% increase and Town Square with a 14% rental increase year-on-year. 

2023 Outlook 

I don’t have a crystal ball and I do not predict the market, especially in Dubai. I have specifically learned over the last few years that anything can happen, which can set off multiple triggers one could never expect or predict. With that said, I do believe we will continue to have a strong real estate market in 2023, despite global economic factors and possible global recession. I have observed in 2022, that Dubai is unique and immune to many external elements. Yes Dubai is affected, but not at the same rate or extent as others. However, we still do need to bear in mind that certain issues, whether positive or negative, have a direct affect on Dubai such as the supply chain issue, rising interest rates, the strength of the US dollar, Russian - Ukraine conflict, proactive government, price of oil, new housing supply and further increase in population.

I do expect sale prices to continue to rise 10 - 15% across Dubai in 2023, as new residents move into this fabulous Emirate to reap the benefits and exceptional quality standard of living. This will be particularly prevalent in the popular, prime areas and ultra, prime areas such as Dubai Marina, Arabian Ranches, Emirates Living and The Palm where prices will most likely rise higher by 25 to 35% due to high demand and low supply. We will also continue to see HNWI invest in Dubai as prices are still extremely attractive compared to their home countries.

In addition, I still foresee residents who have made Dubai their home want to settle more in their roots and buy, despite rise in sales prices. According to Allsopp & Allsopp Group buyer data, 41% of buyers were cash whereas 59% were mortgage in 2022. This is a massive shift from previous years where cash buyers, investors always dominated the Dubai real estate market. This data is significant when we look to the future of how Dubai is going to be shaped by it's residents, the ones who have made Dubai their home and contribute to the overall economy.

Due to the current state of the global economy, coupled with the fact that investors appreciate and value Dubai’s business-friendly policies, diversified economy and excellent infrastructure, I believe FDI will continue to increase in 2023 and surpass 2022 figures. 

In 2023, we can expect rents to continue to rise across Dubai by 10 - 15% mostly due to an increase in the population and local buyers slowing down their purchasing decisions due to inflation, rise in cost of living and higher interest rates. Just like for sales, the prime, popular areas and ultra, prime areas will increase the most and most likely rise by 15 - 20%.

It will be interesting to see what happens in the short-term rental market as hotels have become quite aggressive and competitive with their pricing structures in 2022. The hotel industry in Dubai was quick to notice that traveller’s budgets in 2022 tightened, however demand was still high. Therefore Dubai took advantage of the 'right product at the right price' and offered cheaper hotel options which had a direct effect on short term rentals. We saw hotels in Dubai Marina with the highest occupancy rate of 76% while short-term rentals occupancy rate in Dubai Marina was 73% in 2022, down by 7% when compared to 2021. 

All in all, it doesn’t surprise one that 2022 ended up being a phenomenal year for Dubai real estate as all the right boxes were getting checked. In addition to being a tax haven, Dubai also became a political haven to those suffering in their home countries. Dubai also opened its door wider and allowed for many to visit for the first time and potentially make Dubai their home. 

Last year in my 2021 outlook, I ended it with this “Nevertheless, Dubai continues to thrive and has become the economic hub of the region attracting more businesses and foreign direct investment with its encouraging and innovative environment. This, coupled with the proactive measures put in place over the last few years by introducing various incentives, laws and legislation will be what sets it apart from the rest of mature cities and will be the driving factors to continue the city's growth.” This could not have been more beautifully orchestrated as it was in 2022. It shaped the current economy, including the real estate market, and the overall attractiveness and lure of Dubai. 

There is much to look forward to in 2023 and I’m confident that, along with the various initiatives announced this year such as the Project Of The 50 Program and the Dubai Economic Agenda D33, Dubai will continue to flourish and excel above other mature markets with its proactive measures and set the bar higher than ever before.