How has Dubai managed to insulate itself from the global economic and political woes that are causing this price slump?


I’ve been keenly following global property news and can’t help but notice global house prices are breaking records this year – for how fast prices are falling.

A quick scan of the latest figures, and you notice the downward spiral – Sydney, prices down by 14 percent; Toronto, down by 16 percent, San Francisco, a 15 percent price drop….while Germany recently recorded its biggest six-month price fall in two decades. The UK, my home country, has seen price drops of around 3.2-4.2 percent.

Working with global HNWIs means I have to keep my eye on global markets and trends. But what’s abundantly apparent is that while the rest of the world seems to be going through what’s already being dubbed a ‘mini crash’, Dubai and the UAE are showing excellent resilience in property pricing.

This got me thinking why? How has Dubai managed to insulate itself from the global economic and political woes that are causing this price slump? Of course, globally, you can easily argue that the price drops are something of a correction, a reaction to the eye-watering price hikes in popular global cities we’ve seen in recent years.

That correction doesn’t need to happen in Dubai, where property buyers still generally get excellent value. And yet last year – 2022 – saw luxury property prices in Dubai rise by an incredible 89 percent, according to industry figures.

I believe this hike – and I speak as the property broker behind the most expensive villa sale ever achieved in Emirates Hills – is down to a ‘perfect storm’ of factors.

Firstly, let’s rewind to the pre-pandemic days. It seemed like most economies were on an even keel, if not booming, and property prices were rising as people saw little incentive in leaving their home countries.

The pandemic saw a shift in mindset, and Dubai showed great foresight and vision by dealing rapidly with COVID, striving to ‘remain open’ while most countries closed their borders for months, if not years.


 

Another side effect of COVID was that the change in lifestyle – working from home, not going out to pursue dining or leisure activities – saw people saving more money than was previously feasible. Add in government handouts to help people weather the pandemic, and there were a lot more people who were ‘cash rich.’

And those ‘cash rich’ people were keen to go on holiday, with Dubai presenting a very appealing option during a time when travel was very limited.

Expo 2020, the FIFA World Cup and the easing of regulations regarding business ownership and set up, then the global ripple effects of the Ukraine war – all within a short time – presented the perfect storm to showcase Dubai. The population boomed and I believe that directly correlates to the increase in property prices.

The ease of getting a wide range of visas – from freelance visas via property ownership visas to investor visas – also encouraged an influx of immigrants – attracted by all that Dubai has to offer, and the feeling that having survived the pandemic, it was time for a change to a better lifestyle.

Scarcity always rises prices, and we saw a rise in the number of people buying holiday homes in Dubai, alongside a spike in the number of Chinese and Russian property buyers, driven by COVID and Russia’s actions in Ukraine.

Dubai’s property market: Sustainable growth or looming correction?

Dubai offers a strong economy, a very favourable tax regime, a fantastic lifestyle, and limited stock of the larger, luxurious properties that people – spending more time at home than perhaps ever before – are looking for.

But are Dubai’s property prices sustainable? I think not. But I also think that Dubai’s ability to weather global economic troubles is proven, and we are well placed to have a relatively ‘soft landing’.

Pundits suggest Dubai will see modest growth this year, of around 13.5% – but that’s an incredible figure given the state of the property markets in the rest of the world.

We’ve had a fantastic couple of years, but property company Knight Frank has adjusted its forecasts downwards, to just 2 percent price growth in 2023 prime global property prices, suggesting its reassessment is due to continuing economic uncertainty and rising mortgage costs.

From my perspective, Dubai’s prime property market looks solid for the next 12-18 months, but I believe even the most robust economies will see a price fall – or perhaps a correction – within the next few years.