The Dubai real estate sector continues to thrive, but there are signs of a slowdown said Cushman & Wakefield Core in its Q2 2024 market update.
The real estate agency said that while Dubai’s market continues to perform steadily across most indicators, signs of stabilisation are emerging and the pace of growth is slowing, especially in the secondary residential market, which is gradually transitioning into a stabilisation phase.
In the second quarter of 2024 the number of properties handed over to buyers fell markedly, although the number is expected to surge in the second half of the year.
Dubai real estate stabilisation
The price of property in Dubai has increased for the 16th consecutive quarter, with a 21 per cent annual increase.
Ultra-prime properties are performing well, with more than 300 homes sold for AED20m ($5.4m) and above in Dubai between April and June.
Despite this, signs of a steadying of growth are emerging said Cushman & Wakefield Core.
Rising launches with moderate handovers
During Q2 2024, a lower rate of handovers was observed with just 5,391 units delivered compared to more than 8,350 units in Q1 2024.
A total of 24,300 residential units are anticipated over the remainder of 2024, bringing the annual total to nearly 39,000 units, which is similar to the number of handovers in 2023 and in line with market demand.
Prathyusha Gurrapu, Head of Research and Consulting at Cushman & Wakefield Core, said: “Growing from a high base, new project launch volumes continue to see record numbers with a 42 per cent y-o-y increase, as demand and absorption remain buoyant.
“We have also seen developers with large landbanks initiating projects and smaller private developers aggressively acquiring land, which continues to be a challenge to source.”
Off-plan market dominates, secondary market stabilising
Prathyusha said: “Until the end of 2021, the differential between off-plan transactions and secondary market transactions was limited, however, over the last two to three years, off-plan transactions have sharply increased, underpinned by the rise in new project launches.
“While secondary market transactions have shown a moderate growth of 5 per cent, off-plan transactions saw a substantial spike of 61 per cent.
“In Q2 2024, off-plan transactions accounted for more than double the number of secondary market transactions, indicating that the off-plan market has a higher share of investors compared to end-users.”
Signs of stabilisation
Prathyusha said: “Primary off-plan sales prices (inventory sold by developers) are higher than secondary off-plan prices (resales by individuals) across most Dubai districts and off-plan projects.
“Although the percentage difference is still in single digits, it suggests that sellers are struggling to match original prices and selling slightly below market value to exit.
“This trend is worth monitoring, as it may grow in the coming quarters with more off-plan supply entering the market.”
Other indicators of market stabilisation include a higher number of sales listings witnessing no change in listed prices in H1 2024, while a much lower number of listings saw prices increase compared to the same period.
Furthermore, since Q3 2023, the median residential listing price has declined at an average of 7 per cent q-o-q, further indicating market adjustment.
Prime Dubai real estate market
While city-wide sales prices continue upward trajectories for the 16th consecutive quarter with a 21 per cent year-on-year increase, Cushman & Wakefield Core said prime districts have seen relatively modest sales price increases while mainstream and affordable districts are witnessing steep increases albeit significantly impacting their affordability.
Dubai remains a strong global ultra-prime market with more than 305 residential properties sold above AED20m ($5.4m) in Dubai in Q2 2024, marking a 12 per cent y-o-y increase.
However there has been a marked slowdown in off-plan transaction volumes over the past two quarters, said the real estate experts.
Prathyusha said: “This is mainly due to the lower off-plan inventory available in the market for these ticket sizes. That said, secondary market ultra-prime transactions have retained their steady activity levels with 135 transactions – the highest ever number of secondary market ultra-prime transactions registered in Q2 2024.
Rents rise yet villa market moderates
Cushman & Wakefield Core said: “We saw a relative stabilisation in city-wide villa rents, which have risen by 13 per cent year-on-year, whereas apartment rents are up by 22 per cent compared to the same period last year.
“Household incomes are not keeping pace with rising rents, which is further contracting disposable incomes. We have seen a higher percentage of tenants continuing to renew, with the number of renewals in Q2 2024 seeing a 14 per cent increase.
“Similar to the trends seen in the sales market, rents in the mid-market apartment districts saw the steepest rise in rents, whereas prime districts saw lower levels of increase”.