How the UAE’s demographics are shaping the property market?

The UAE’s dynamic real estate market is significantly influenced by its evolving demographic trends. The interplay between the country’s population characteristics and property demand shapes both the residential and commercial sectors, driving sustained growth and development.

Demographics and Population Insights

The UAE, with a population of 12.5 million, is predominantly expatriate, comprising about 88% or 11.06 million as of July. The largest age group, accounting for 68% of the population, is between 25 and 54 years old. Within this demographic, a substantial portion—approximately 4.75 million individuals, or 43% of residents—are of Indian nationality. Notably, around three million of these Indian expatriates fall within the 25 to 54 age bracket, nearly matching the population of Dubai, which stands at 3.7 million.

Impact on Residential Rentals

This young and transient demographic, particularly among the Indian expatriate community, tends to prefer renting over buying due to the flexible nature of expatriate life. Areas with well-established Indian communities, such as Bur Dubai and Karama, remain attractive due to cultural familiarity and community support.

Young professionals in the UAE often prioritize career growth, leading to frequent job changes and relocations. Renting provides the flexibility to move without the long-term commitment of home ownership. Additionally, the sharp rise in house prices—up 20% annually in May according to JLL—makes renting a more appealing option for many young residents. Renting avoids the high costs associated with home ownership, offering more affordable living options with amenities such as pools, gyms, and maintenance services included.

Shifting Attitudes Towards Home Ownership

Cultural attitudes toward home ownership are shifting among younger generations. Unlike previous generations, today’s youth do not necessarily view home ownership as a requisite for adulthood or financial stability. Instead, they prioritize experiences like travel and leisure over committing to a mortgage. Renting provides the financial freedom to pursue these interests, offering greater flexibility and fewer long-term financial commitments.

Young professionals also seek residences close to work, entertainment, and amenities, driving demand for apartments in urban areas. High occupancy rates in central locations like Downtown Dubai, Business Bay, and the Dubai International Financial Centre are a testament to this trend.

Rising Rents and Market Dynamics

The demand for rental apartments and villas continues to rise, pushing up rental rates. In May, the average residential rent in Dubai increased by 21% annually, according to JLL. The supply-demand dynamics indicate that residential rents will keep climbing. In the first half of the year, 6,600 new units were delivered in Dubai, while the city’s population grew by approximately 50,000 people, highlighting the imbalance between demand and supply.

Commercial Sector Growth

Dubai’s young workforce and the influx of small businesses, along with the growth of the financial services sector, have bolstered the commercial property sector. Office occupancy rates rose to 91.3% in the first quarter, up from 90.1% during the same period last year. This high occupancy, despite limited new supply, underscores the demand for modern, flexible office spaces.

Retail and Hospitality Influence

Beyond residential and commercial sectors, Dubai’s retail and hospitality markets are significantly influenced by the country’s diverse demographic profile. Major malls like Dubai Mall and Mall of the Emirates report high footfall and strong sales performance, reflecting the purchasing power of residents and tourists. Dubai Mall, for instance, claimed to be the most visited mall globally last year, welcoming a record 103 million visitors, driven by the city’s thriving tourism industry.

Future Trends and Government Reforms

Looking ahead, the UAE government’s reforms, such as the issuance of golden visas for expatriates, are likely to shift the residential market towards sales. More residents might favor buying over renting, supporting future growth in the residential real estate market. An increase in homeownership among expatriates will also expand the mortgage market, further driving the sector’s growth.

Reference: The National News