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Dubai Real Estate: Surge in Demand for $10mn+ Luxury Homes Causes Supply Shortage

Posted by main.admin on July 9, 2024

Dubai’s luxury real estate market is facing a significant shortage of high-end properties as demand from ultra-wealthy buyers soars, according to a new report by Knight Frank. Listings for properties priced over $10 million have dropped by 65.5% in the last year, with only 460 currently available.

Decline in Listings and Intense Competition

The report highlights a 47% decline in listings for prime residential properties in Dubai’s most coveted neighborhoods, such as Emirates Hills, Palm Jumeirah, Jumeirah Bay Island, and Jumeirah Islands. The number of homes for sale in these areas fell from 5,376 in Q2 2023 to just 2,851 in Q2 this year, reflecting intense competition among wealthy buyers.

Faisal Durrani, Partner and Head of Research for MENA at Knight Frank, noted that the global super-rich are overwhelmingly driving the demand for luxury homes in Dubai. This trend is evident in the ultra-high-end segment of the market, with Dubai recording 190 home sales priced above $10 million in the first half of 2024, nearly matching the total for the same period in 2023. Sales of homes priced over $25 million grew by 25% in the second quarter of 2024 compared to the first quarter.

Surge in International Capital

Knight Frank’s 2024 Destination Dubai report identified $4.4 billion of global private capital targeting Dubai’s residential market this year, a 76% increase from 2023. This surge in international buyer interest is outpacing the ability of developers to meet demand.

The scarcity is most acute in the $10 million-plus category, where listings have plummeted to just 460 properties. Will McKintosh, Regional Partner and Head of Residential for MENA at Knight Frank, highlighted that sales of $25 million-plus homes have grown significantly, with 21 such sales in the first half of 2024 alone, a remarkable increase from the historical average of fewer than three per year between 2015 and 2021.

Dubai Real Estate: Surge in Demand for $10mn+ Luxury Homes Causes Supply Shortage

Palm Jumeirah Leads the Market

The Palm Jumeirah remains a focal point in Dubai’s luxury real estate market, accounting for 89.3% of prime deals in the first half of 2024, with 853 home sales. It also led in the $10 million-plus segment, with 21 transactions worth $365 million in Q2 2024.

Despite supply constraints, Dubai’s prime residential market has experienced strong price appreciation. Average transaction prices in the most affluent neighborhoods reached AED 3,706 per square foot in the first half of 2024, a 7% increase from the same period in 2023. This growth reflects a shift in buyer behavior, with many high-net-worth individuals viewing Dubai real estate as a long-term investment rather than a speculative opportunity.

Shift Towards ‘Buy-to-Hold’ Mentality

This indicates a shift towards a ‘buy-to-hold’ mentality among international HNWIs, who are increasingly purchasing homes for personal use rather than for flipping.

Innovations and Future Prospects

The sustained interest from the global elite is driving developers to innovate and introduce ultra-luxurious features and amenities to cater to the discerning tastes of these buyers. This includes bespoke interior designs, private pools, advanced home automation systems, and exclusive access to leisure facilities. Developers are also increasingly partnering with renowned architects and interior designers to create iconic residences that stand out in the competitive market.

In addition to the luxury residential sector, Dubai’s strategic location and business-friendly environment continue to attract international investors. The city’s robust infrastructure, world-class healthcare, and educational institutions, coupled with its vibrant cultural and entertainment scene, make it an appealing destination for wealthy individuals and their families. This holistic appeal is not only driving real estate investments but also fostering a dynamic community of global citizens in Dubai.

Reference: Arabian News

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