PHOTO
As residential property sales prices in Dubai have risen for nine consecutive quarters, rents have kept pace with the increase meaning there is no yield compression for investors.
Knight Frank’s Spring 2023 Dubai Residential Market Review said rents in the emirate had risen in line with capital value growth, and that rents for villas have now exceeded the previous peak of 2014 by 8%.
Average rents in the city are now 88 dirhams ($23.96) per sq.ft., with Palm Jumeirah villa rents increasing by 31% in the first quarter of 2023 compared with Q1 2022, and by just over 110% overall since the start of the pandemic, one of the highest gains in the market, the report said, reaching AED 152 per sq.ft.
Average lease rates in The Springs and Arabian Ranches average lease rates have climbed by nearly 35% and 23% in the last 12 months.
Apartment rents have also grown, rising by 26% since last year and are now at AED 90 per sq.ft., with Palm Jumeirah and Business Bay seeing the highest increases at 34% and 31%.
They have exceeded pre-pandemic levels by 27% but are still 13% lower than the last market peak in 2014. But villas have seen average rental rates rise by close to 58% since the pandemic began and are now 8% higher than last peak in 2014, Knight Frank said.
Residential sales
In the residential sales market, values have increased by 5.6% in Q1 2023, the ninth consecutive quarter of growth.
Villa prices rose by 5.1% between January and March, reaching AED 1,450 per sq. ft. while apartment prices increased by 5.7% to approximately AED 1,230 per sq.ft. during Q1.
Faisal Durrani, partner, head of Middle East Research, said sales prices are still behind the 2014 peak by 15%, with apartments slower to recover, trailing the last market peak by 18%, but villa sales prices have equalled their 2014 peak, up 15% year-on-year. Villa prices on the Palm Jumeirah have risen by 126% since the start of the pandemic, risen by 14% during Q1 and 53% over the last 12 months.
Dubai Hills Estate saw a 23% increase in apartment prices in the last 12 months.
Andrew Cummings, partner and head of Prime Residential at Knight Frank said there had been a 44% increase in average villa prices across Dubai since January 2020.
Outlook
Knight Frank said Dubai’s prime residential market is expected to experience the highest growth rate for any prime residential market globally, with a projected growth of 13.5% in 2023, supported by clear demand-supply imbalance and a positive economic backdrop.
Durrani said: “Three-and-a-half years into the current market cycle, overall price growth is moderating as the extraordinary rises registered during the pandemic begin to work their way out of the equation.
“The bottom line however remains a significant mismatch between demand and supply of luxury homes. This combined with Dubai’s emergence on the global stage as the go-to second homes market continues to drive prices and indeed this is why over the last 12-months, prices have risen by 13%, eclipsing 2022’s 10% growth.”
(Reporting by Imogen Lillywhite; editing by Brinda Darasha)
