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The Dubai property boom will continue to drive house prices up by 8% in 2025, underpinned by a shortage in supply, according to a new report by property consultancy Knight Frank.
The ‘Dubai Residential Market Review: Special Edition’ study reveals that house prices across the emirate currently stand 19.9% higher than the same time last year, “evidenced by the surge in property transactions throughout 2024.”
In Q3 2024, the number of transactions reached 47,269, the highest quarterly figure on record, Knight Frank said, indicating a 41.8% increase compared to the same period in 2023.
The total value of deals between January and September 2024 exceeded 306.3 billion UAE dirhams ($83.4 billion), with a 36% increase over the same period in 2023. In Q3 alone, sales volume reached AED 116.8 billion.
“House prices in Dubai continue to be fuelled by relentless demand. Unsurprisingly, prices in the mainstream market continue to edge upwards, climbing by 4.3% in Q3, taking city-wide prices up by 19.9% on this time last year...,” Faisal Durrani, Partner – Head of Research, MENA, said.
He continued: “Across the city, there has been a 30% year-on-year decline in the number of property listings. Furthermore, the rate at which luxury homes are selling has also continued to climb, tripling over the last 18 months to almost one in every five homes listed being sold between June and September.”
The report reveals the rate at which the number of homes valued over $1 million has grown in Dubai, jumping from 6.3% of all sales in 2020 to 18.1% today.
“This effectively means nearly 1 in every five homes in Dubai is worth over $1 million,” Durani said.
However, new buyers could see some respite as well, with the report indicating that the rate of growth in house prices will begin to slow in 2025.
“For Dubai’s prime residential market, following an increase of 6% the last twelve months, we expect values to end 2024 in line with our original consensus forecast of 5% issued last autumn,” Durrani said, adding that for 2025, they are forecasting growth to be more modest and closer to 5%, “which builds on the 44.4% growth registered during 2022 and the 16.3% increase last year.”
Supply concerns
According to Knight Frank, developers have been racing to satisfy the growing levels of demand for housing with the property consultancy estimating that close to 300,000 homes are due across Dubai between now and the end of 2029.
Apartments will account for 80.1% of the supply due by 2029, while 17.4% will be villas.
Data reveals a villa shortage will persist, with just 8,900 new villas expected by the end of 2024 and a further 19,700 by the end of 2025.
Knight Frank further forecasts by 2040, Dubai will need in the region of 37,600 to 87,700 homes each year to accommodate between 5.8 to 8.6 million residents.
“Assuming historical delays of up to 30% of units each year persists, 210,000 units will realistically be completed over the next six years. This translates into 35,000 homes per year for the next six years, hinting at a likely long-term shortfall in housing…,” the report said.
Petri Mannila, Partner – Head of Prime Residential UAE, added: “The limited availability of sites across key locations in the city is also contributing to rising prices for off-plan homes, while stock in the secondary market too is experiencing significant price growth, especially where older homes have been refurbished.”
Despite the likely supply-demand imbalance that is expected to underpin house price growth in the long term, Knight Frank also highlighted macroeconomic risks such as a global economic slowdown, oil price volatility and regional competition from gateway cities such as Riyadh that could affect residential value.
(Writing by Bindu Rai, editing by Seban Scaria)
