With performance and activity levels hitting multi-year record highs in many sectors in 2023, the UAE real estate market is expected to have another fantastic year, according to analysts at top real estate services and investment firms.
According to CBRE’s UAE Real Estate Market Review Q4 2023, activity levels in the UAE’s real estate market stayed stable over the last quarter of 2023, and this continued to drive performance.
“The UAE’s real estate market concluded another stellar year, with performance and activity levels reaching multi-year if not historic, record highs in many sectors. Attention will now turn to the outlook for 2024, where, albeit reduced, but still material global economic headwinds are underlining concerns as to what extent these levels of performance could continue. Even with potential global economic downside risk, we anticipate that both performance and activity levels will be resilient over the course of this year, albeit with growth rates expected to moderate in a number of sectors,” said Taimur Khan, head of Research – Mena at CBRE in Dubai.
In the year ending December 2023, average residential prices in Dubai grew by 20.1%; prices for apartments and villas increased by 19.8% and 21.8%, respectively. In Abu Dhabi, average apartment prices increased by 1.1% in the residential sector during that time, while average villa prices barely changed from the same period the previous year.
“The macroeconomic sentiments for the UAE remain favorable. The non-oil sectors have seen significant expansion over the past two years, remain healthy, and are well positioned to grow over the next 12 months, which will benefit the real estate sector. However, there may be risks of oversupply for select assets across a few locations, which may limit any significant increase in average prices going forward,” said Swapnil Pillai, associate director of Research at Savills Middle East.
According to Savills, the office real estate market in Dubai saw a spike in demand in 2023, with some developments witnessing yearly rental increases of more than 40%. Meanwhile, residential transaction activity grew by 29% year over year to an all-time high of 118,200 units.
According to the CBRE report, there was a slowdown in Abu Dhabi’s rental market, with a 12.6% year-over-year decline in the total number of registrations in the final quarter of 2023. An 18.4% decrease in renewed rental registrations and a 2.2% decrease in newly registered contracts were the main causes of this decline. The average apartment rent increased by 2.0 percent annually to Dh64,996 despite the slowdown in activity.
Over the same period, villa rents also saw a slight increase of 0.8 percent, reaching an average of Dh163,098. “Looking ahead, approximately 4,438 new residential units are expected to be completed in the coming year, with 69.1 percent expected to be delivered in Yas Island and Al Maryah Island,” said the report.
The average residential rent in Dubai increased by 18.9% in the year ending in December 2023, a decrease from the 19.2% growth observed in November 2023. The rental market in Dubai saw a continuous moderation in its growth rate throughout the year. 39,190 residential units are anticipated to be delivered in total by 2023, with Meydan One, Downtown Dubai, and Business Bay accounting for 34.4% of this new stock’s estimated completion. In 2024, an additional 68,880 units are anticipated to be delivered, with 22.7% of those going to be delivered in Damac Lagoons, Business Bay, and District Seven.
Within the hospitality industry, the total number of guests staying in Abu Dhabi hotels reached 4.94 million in 2023, up 29.0% from the previous year and 9.9% from the pre-pandemic levels. Similarly, Dubai saw a 19.4% increase in foreign visitors in 2023 compared to 2022, totaling 17.15 million.
Leasing activity in Abu Dhabi’s retail sector slowed down in the fourth quarter of 2023; 6,913 rental contracts were registered, a 6.5% decrease from the same period in 2022. The decline was primarily caused by a 3.4% decrease in newly registered contracts and a 7.9% decline in renewals. In the same time frame, total rental registrations in Dubai’s retail market increased slightly by 0.7% to 17,894. Within this, though, renewals increased by 5.6% while new registrations fell by 7.7%.