Dubai real estate: Is it the right time to invest in buying a villa?
Dubai’s property market hit AED346 billion in transactions during the first half of 2024, marking a 23 percent increase from 2023. This includes 100,520 deals closed and 50,000 new investors entering the market, as per recent figures released by the Dubai Media Office (DMO) on X (formerly Twitter).
Expert Insights
As Dubai’s real estate market continues its strong performance in 2024, potential investors are increasingly asking: Is now the right time to invest in villas? Here is what experts told Arabian Business.
Strong Investor Activity
“We are still seeing strong market performance heading into the second half of 2024,” said, Chairman of Allsopp & Allsopp Group. “Buyers have enjoyed strong returns over the past three years and this has continued with the average price per square foot (for villa sales) up 22 percent year-on-year and sales transaction volume up 80 percent for the same period, showing huge demand from investors and buyers across the market. I firmly believe Dubai still offers great value compared to other global cities for real estate returns,” Allsopp added.
Imbalance Between Supply and Demand
Managing Director of haus & haus Real Estate, explained that buyers looking to invest in villas “can look to getting 5-8 percent return (net) on investment.” One of the key factors driving the villa market is the current imbalance between supply and demand. “Recent industry figures suggest that if every property that has been developed was handed over right now, out of the total properties completed there is only about 15 percent that are villas and townhouses,” adding that this scarcity of supply relative to demand is likely to support villa prices in the medium term.
High-End Market Performance
Moreover, the luxury segment of the villa market is particularly buoyant. Allsopp reports that 196 properties sold for over $10 million in the first half of the year, indicating strong demand at the high end of the market. This trend is further evidenced by recent record-breaking sales, such as an AED105 million villa in Tilal Al Ghaf, handled by Allsopp & Allsopp’s Private Office team.
Considerations for Investors
However, both experts stressed the importance of careful consideration before investing. “Before making a real estate purchase, buyers should thoroughly evaluate their financial situation. This includes assessing their overall budget and determining the maximum amount they can afford to spend on the property,” Allsopp said.
Ease of Purchasing Property
Bannan echoed this sentiment, adding, “They should consider the sale price, plus circa 6-7 percent fees. If they are purchasing with a mortgage, there will also be a mortgage amount of 0.25 percent of the loan amount which is payable to the Dubai Land Department (DLD).” Bannan also highlighted the ease of buying property in Dubai: “The benefit of buying property in Dubai is that it is incredibly easy – most of the processes are digital if you are overseas. When it comes to the transfer process, yes you need to be here in person, but it is also easy to get a power of attorney for someone to be here for you as well. Compared to most major cities in the world, the process here is a breeze.”
Prime Areas for Villa Investments
For those considering villa investments, location is a crucial factor. “Communities such as Tilal Al Ghaf, Town Square, and Villanova are prime examples of how well Dubai’s city boundaries have expanded. When launched over three years ago these communities were seen as ‘far outside’ Dubai’s more established residential communities. Fast-forward today, and they are now amongst the more in-demand locations with demand and sales/rental prices soaring,” Allsopp said.
Government Initiatives
The experts also pointed to government initiatives as key drivers of future demand for villas. “The Dubai government is doing so much to attract people to come and live and work here, such as implementing the Dubai 2040 Urban Master Plan, which aims to enhance quality of life through increased green spaces, and improved infrastructure – not to mention introducing long-term visas like the Golden Visa to attract skilled professionals, investors, and entrepreneurs,” Bannan said.
Villa Rental Yields
Rental yields are another important consideration for villa investors. “Villa rental yields on average stand at 5.23 percent with a year-on-year change of 1.16 percent. Based on top year-on-year rental yields, the top communities include Dubai Investments Park (11 percent), Meydan (11 percent) and Motor City (8 percent),” Allsopp said, adding that investors who bought properties over three or more years ago often see better yields today due to overall rent and price increases, sometimes exceeding 10 percent in some areas.
Categories of Potential Buyers
Allsopp further categorised potential villa buyers into three groups:
1. End users (homeowners): “We are seeing a huge increase in first-time buyers and rental tenants looking to escape ever-increasing rents in Dubai. Homeownership/rental savings can be significant in many cases for those that are able to make the jump onto the property ladder. Our Mortgage teams can help end users at all levels assess the financial implications of any home purchase and sales agents are on hand to find first-time buyers their dream home.”
2. Property Investors: “With rental rates across the city hitting new heights, landlords are seeing excellent rental yields from tenants. For an investor seeking short-term returns (rental income) and the potential for capital appreciation, buying on the ready/secondary market remains an attractive option for many.”
3. Long-term investors: “Dubai remains an excellent choice for both residential and international property investors, who are prepared to invest today in anticipation of greater capital appreciation gains in the future. For these investors, off-plan investment opportunities are seen as a great opportunity, evidenced by sell-out project launches across the city in the first half of 2024.”
Future Market Outlook
Looking to the future, both experts expressed optimism about the villa market’s trajectory. “The population growth will have the biggest impact – the continuation of more families moving to Dubai and making it a home for the foreseeable future will have a positive effect on prices,” Bannan said.
Allsopp added that Dubai’s strong tourism sector, with 9.3 million visitors recorded in the first half of the year, further reinforces the market’s positive trajectory. “Ultimately, your decision to buy now will depend on your real estate goals, appetite for risk, and return window,” he concluded.
Reference: Arabian Business
