Dubai home prices to reach ‘record highs’ in 2024; villas to mark strong capital gains

Originally published on May 22, 2024 | Zawya

Dubai housing prices will continue to rise in 2024, with capital gains in the villa segment projected to hit 10-year highs.

According to international consulting group ValuStrat, which released its April price index for the emirate, apartment prices will also maintain an upward trajectory, albeit at a slower pace than villas.

“Apartment price growth, which only started gaining momentum in the second half of last year, is expected to reach new record highs this year,” Haider Tuaima, Director and Head of Real Estate Research told Zawya. “It is highly likely that villa capital gains will exceed the record highs of 2022.”

The ValuStrat Price Index (VPI) for April revealed the average villa valuation per square foot surpassed AED 2,000 for the first time in 10 years. Villas topped the previous market peak, with Tuaima saying that villa prices have already doubled since the pandemic and surpassed the peak prices of 2014.

Villa capital gains recorded a 2.4% month-on-month uptick in April and a 31.2% rise since the previous year. The figure is a close second to 2022, which saw the highest rise in a decade, with villa prices witnessing a 34.1% spike.

Communities that saw the highest price increase were sought-after communities including The Palm Jumeirah, which saw 40.1% hike, followed by Jumeirah Islands (39.5%), Dubai Hills Estate (36.2%), Green Community West (31.4%), and Emirates Hills (31.1%).

The apartments segment witnessed a 21.3% year-on-year increase, with a monthly rise of 1.6%, according to the index.

On average, the VPI reached 170.8 points in April, marking a 26.1% annual increase, with a monthly rise of 2% for the emirate’s overall residential sector.

Price concerns

According to ValuStrat’s Tuaima, there is a growing concern over value for money and buyer affordability.

“As seen in previous cycles, external global shocks could negatively affect market sentiment…. Just after the pandemic, the average sold home was 2,000 sq ft and cost AED 1.7 million, translating to AED 866 per sq ft. Today, the average property size has decreased to 1,427 sq ft, while the cost has risen to AED 2.2 million, or AED 1,516 per sq ft,” he explained.

Tuaima continued: “Furthermore, villa rentals have stabilised over the past six months, indicating that tenants can no longer afford significant rent increases.”

The rental highs are also seeing many swap a rent cheque in favour of a mortgage, with the VPI figures indicating that annually, off-plan Oqood (contract) registrations increased by 76.4% year-on-year, while the volume of ready home transactions was up 9.5% since last year.

While many industry experts are eyeing a rise in the supply of residential units to trigger a price correction in the future, with a Dubai Property Watch report last week pegging that number at 64,400 new units by year-end, Tuaima remained cautious.

“There are concerns about oversupply, particularly with upcoming projects on the outskirts of the city targeting low and middle-income households. This could lead to a market correction, but only if all under-construction projects are completed on schedule, which hasn’t been the case so far,” he said.