According to an industry expert, there has been a slight shift in the Dubai real estate market as it continues its upward trend, driven by significant growth over the last few years. This shift is visible in various data sets as well as in everyday real estate activities across the emirate.
The founder of RealTrust, a real estate solutions provider based in Dubai, Lynnette Sacchetto, noted that the real estate market is now gradually exhibiting signs of realigning with market norms rather than the anomalies in demand seen in previous years, following the post-Covid surge in record-breaking transactions and an influx of foreign investors.
Even though the market is still expanding month over month, it is starting to slow down; this trend is probably here to stay for the next year. Several underlying factors, including the entry of new supply into the market and sellers modifying their asking prices when they realize their properties are not worth the inflated values of past years, will also impact this shift.
High demand, which has since subsided, and limited supply in certain areas and segments were the main drivers of these inflated prices, according to Sacchetto, a specialist with eighteen years of experience in Dubai’s PropTech sector.
She said it was crucial to keep in mind that, even though sales transaction data serves as the foundation for market analysis, it lags behind real-time market conditions and thus does not fully capture immediate shifts and trends in the real estate market.
“Once a deal is agreed upon, it must go through a comprehensive transaction process that can take 3-4 months to complete. This is true for ready/secondary market transactions and off-plan transaction registrations.
Subsequently, the data needs to be analyzed and reported, adding further time to the timeline. Therefore, other data sets such as listing data, supply data, demand data, mortgage data, and off-plan developer data need to be analysed in parallel to gain a more accurate and timely understanding of market dynamics,” explained Sacchetto.
She went on, “Looking at the data on property listings reveals one of the early signs of a market shift that started at the end of last year.”
The median residential listing price value has been declining month over month by an average of 5% since September 2023, according to Reidin, a real estate data platform in the United Arab Emirates. This was the first indication, which we are now witnessing, that the market was changing from a seller’s market to a buyer’s market.
A further sign of a more stagnant residential sales listing market as of Q2 2024 was the average days on market for a residential sale listing, which grew from a strong 30 days last year to over 90 days today.
It further stated that the transaction data is now beginning to mirror this trend in the listing data.
The volume of residential sales transactions in the secondary/ready market fell 2.9% on a quarter-over-quarter basis, according to open data released by the Dubai Land Department for the second quarter. This was the segment’s second consecutive quarter of decline.
“Looking more closely at Q2 performance, we observed a total of 40,936 sales transactions worth AED118 billion ($32.2 billion) marking a 10% increase q-o-q and a 36% increase year-on-year in overall sales transaction volume across all segments,” said Sacchetto.
According to the breakdown, 35% of sales transactions, or 14,294 sales, were in the secondary/ready market, and 65% of sales transactions, or 26,642 sales, were for off-plan.
She believes that the future of the Dubai real estate market will be greatly influenced by the marked increase in off-plan property launches and completions because these developments are anticipated to have a big impact in the next years.
In Dubai, 107,145 new residential units were introduced in 2023; thus far in 2024, 78,361 new units have been introduced. These numbers are amply demonstrated by the Q2 off-plan sales transaction data, which showed an 18% quarter-over-quarter and a 64% year-over-year increase in off-plan sales.
The expert noted that although sales volumes are rising, it is crucial to remember that the median off-plan sales price in Q2 was AED1.54 million, a slight 0.6% decrease from Q1 and the second consecutive quarter of a decline in this figure.
“Additionally, individual sellers in these off-plan projects are struggling to sell at opening prices (OP) which is the prices they originally bought for, or below, to avoid the next developer payment they cannot afford, opting to take a loss instead of the premiums they were promised when they originally purchased at the peak of the market in 2022 and 2023,” noted Sacchetto.
According to her, this has been a typical occurrence for the past few months and is probably going to get worse over the upcoming quarters and years as a sizable portion of off-plan supply starts to transition in the pipeline.
