The real estate market in the UAE is poised for yet another remarkable year, as analysts from prominent real estate services and investment firms have noted unprecedented performance and activity levels across various sectors in 2023.
CBRE reported that the robust activity levels observed in the final quarter of 2023 have been a key driver for performance within the UAE’s real estate market, as highlighted in its Q4 2023 Review of the UAE Real Estate Market.
“The real estate market in the UAE wrapped up yet another outstanding year, achieving performance and activity levels that not only reached multi-year highs but, in many cases, even historic records. As we reflect on this remarkable achievement, the focus naturally shifts towards the outlook for 2024. While global economic headwinds may pose challenges, they are expected to be somewhat reduced compared to previous periods.
The exceptional performance in 2023 has set a high bar, prompting concerns about the sustainability of such elevated levels in the upcoming year. Despite potential global economic downside risks, there remains an optimistic outlook for the UAE’s real estate market. While growth rates are likely to drop across several industries, analysts predict that performance and activity levels will remain resilient through 2024.
Numerous factors contribute to the market’s ongoing prosperity. The UAE’s advantageous location, welcoming business environment, and wide range of economic pursuits all serve to draw in foreign capital and promote real estate growth. The multi-year and historic highs observed in 2023 underscore the attractiveness of the market to both domestic and international stakeholders.
Looking ahead, analysts acknowledge the existence of global economic headwinds that could impact the trajectory of the real estate market. These concerns, though reduced compared to previous years, remain relevant and are being closely monitored. The extent to which the market can maintain its robust performance will depend on how well it navigates through these potential challenges.
Despite the cautionary note, industry experts express faith in the market’s stability. The anticipation is that, even in the face of global economic uncertainties, the UAE’s real estate sector will remain buoyant. The word “resilient” becomes key in describing the market’s expected response, indicating an ability to withstand and recover from adverse conditions.
It is important to note that while performance and activity levels are expected to remain strong, there is an acknowledgment of a moderation in growth rates. This moderation is seen as a natural progression, aligning with the maturation of certain sectors and the overall market. It suggests a shift from rapid expansion to a more sustainable and stable phase of growth,” stated Taimur Khan, head of Research – Mena at CBRE in Dubai.
Dubai witnessed a substantial surge in average residential prices, marking a notable 20.1 percent increase in the year leading up to December 2023. Notably, apartment prices rose by 19.8 percent, while villa prices experienced a more significant uptick at 21.8 percent during the same period.
On the other hand, Abu Dhabi’s residential sector depicted a different trend, with average apartment prices recording a modest 1.1 percent increase in the corresponding timeframe. Conversely, average villa prices in Abu Dhabi remained nearly unchanged compared to the preceding year’s equivalent period.
Swapnil Pillai, Associate Director of Research at Savills Middle East, expressed optimism about the UAE’s macroeconomic outlook, highlighting favorable sentiments. The non-oil sectors have undergone substantial expansion in the last two years, maintaining their robust health and positioning themselves for further growth in the upcoming 12 months. This favorable revolution is predicted to have a favorable impact on the real estate sector.
However, Pillai also noted the presence of potential risks, particularly the prospect of oversupply in specific assets and locations. This factor could impose constraints on any significant surge in average prices in the foreseeable future. Despite the overall positive economic climate, caution is advised to navigate potential challenges related to oversupply dynamics in select areas.
Dubai experienced a remarkable surge in residential transaction activity, registering a year-on-year growth of 29 percent, reaching an unprecedented peak of 118,200 units. Simultaneously, the office real estate market in 2023 noticed a significant uptick in direction. Some developments reported substantial yearly rental increases, exceeding 40 percent, according to insights provided by Savills.
As per the CBRE report, Abu Dhabi’s rental activity witnessed a deceleration, with a 12.6 percent year-on-year decrease in the absolute number of registrations during the last quarter of 2023. This downturn was primarily fueled by an 18.4 percent decline in resumed rental enrollments and a 2.2 percent drop in new agreements registered. The average flat rent showed resiliency in the face of the general slowdown in activity, rising 2.0 percent year over year to Dh64,996.
An average villa rent of Dh163,098 was achieved during the corresponding period, an increase of 0.8 percent. Looking towards the future, it is anticipated that around 4,438 new residential units will be completed in the upcoming year. Notably, a significant portion, approximately 69.1 percent, is expected to be delivered in Yas Island and Al Maryah Island.
In Dubai, the rental market witnessed a sustained moderation in the rate of growth over the course of the year. Average residential rents exhibited an 18.9 percent increase in the year leading up to December 2023, a slight decline from the 19.2 percent growth recorded in November 2023. Throughout 2023, an estimated total of 39,190 residential units were expected to have been delivered, with 34.4 percent of this new stock anticipated to be completed in Meydan One, Downtown Dubai, and Business Bay.
Looking ahead to 2024, projections indicate the delivery of an additional 68,880 units. Of this, 22.7 percent are scheduled for delivery in prominent areas such as Business Bay, District Seven, and Damac Lagoons. The evolving landscape of Dubai’s real estate market reflects a strategic distribution of new residential units across key locations, contributing to the overall growth and diversification of the city’s housing offerings.
Within the hospitality sector, Abu Dhabi experienced a substantial surge in hotel visitors, with the total reaching 4.94 million in 2023. This marked an impressive 29.0 percent year-on-year increase and a notable 9.9 percent rise from pre-pandemic levels. Simultaneously, Dubai observed a significant uptick in international visitors during 2023, recording a 19.4 percent increase compared to 2022. The total number of international visitors for the year reached 17.15 million, reflecting the city’s resilience and attractiveness on the global tourism stage.
In the last quarter of 2023, Abu Dhabi’s retail sector experienced a slowdown in leasing activity, evident in a 6.5 percent drop in the number of registered rental contracts compared to the same period in 2022, totaling 6,913. This decline was attributed to a 3.4 percent decrease in new contracts registered and a 7.9 percent drop in renewals.
Contrastingly, Dubai’s retail market during the same timeframe showed a marginal 0.7 percent increase in total rental registrations, reaching 17,894. However, this overall growth was nuanced by a 7.7 percent decline in new registrations, balanced by a 5.6 percent increase in renewals. The dynamics within the retail leasing sector of both cities reflect nuanced trends in response to market conditions during the specified period.
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