Dubai’s property market witnessed a rapid surge in asking prices in April 2023, marking the highest rate of monthly increase since October 2022. However, sales transactions experienced a monthly decline of over a third on March’s record-breaking activity.
Dubai real estate investment statistics in April 2023
- Dubai’s property market experienced its highest rate of price increase since October 2022, while sales transactions sharply decline by nearly 35%.
- Following a record-breaking month in March, transaction volumes fall primarily due to seasonality.
- The monthly surge of 1.45% takes capital appreciation to a 6-month peak.
- The number of new projects launched in 2023 passes 29,000 year-to-date, marking the way for a 10% supply increase this year.
- Portfolio loans continue to impact Dubai’s mortgage market and April saw much of March’s expansion contract.
Property price appreciation reaches new heights
April’s activity saw the Dubai property market continue its noteworthy surge in price appreciation, reaching a 6-month high following a sizable monthly increase of 1.45%. This was the most significant month-on-month expansion since October of the previous year. This substantial growth follows a period of steady upward momentum over the past 3 months, indicating a positive trend within the market.
According to the Property Monitor Dynamic Price Index, Dubai’s property values now stand at AED 1,125 per sq ft, which is the highest since the end of 2016. Investors should note that this figure is still AED 109 under the high set in the previous cycle.
Analyzing these price movements provides valuable insights into the potential opportunities and market dynamics at play. The recent surge in property prices signifies a growing demand and positive market sentiment among buyers and investors but does exhibit the potential for further returns on investment.
Shifting sales dynamics as we enter H2
Following a record-breaking month, transaction volumes across the Dubai property market fell by a third in April. The majority of the decline can be attributed to a seasonal slowdown and March’s end-of-quarter surge rather than any sort of long-term correction.
It is noteworthy that the preceding month had recorded a similar level of increased sales, ranking as the fourth highest of all time. This anomaly can be attributed to end-of-quarter filings, which likely contributed to the spike in sales volume. Consequently, the sharp decrease in April appears to be a correction following the exceptional performance in the previous month, rather than a sign of a market downturn.
Furthermore, it is important to consider the impact of external factors on transaction activity during this period, particularly the holy month of Ramadan and its shortened working hours and vacation periods.
The vast majority of 8,043 sales transactions continue to be in the residential sector (7,222 sales transactions and 89% of the market).
New projects fuel growth
The Dubai property market continues to exhibit robust development activity, as evidenced by both delivery and pipeline. Over 29,000 new units have been delivered year-to-date. This substantial increase in development serves as a positive indication of the market’s upward trajectory, setting the stage for a projected 10% (90,000 new units) growth in housing supply by the close of the year.
The current inventory showcases a diverse range of offerings, comprising nearly 4,500 off-plan units with an approximate combined value of AED 17.9 billion. Apartments represent a significant share of 88.4% in terms of volume. Townhouses account for 10.7%, while villas contribute 0.9% of the inventory.
Mortgage trends: bulk portfolio loans impacting volumes
April’s mortgage activity reversed many of the trends observed in March’s data – there was a notable decline in mortgage volumes, primarily attributed to a sharp decrease in bulk portfolio loans.
Following a record-breaking peak in the previous month, the volume of mortgage transactions fell 43.1% in April, with a total of 2,424 loans being recorded, which is much more aligned with the 12-month moving average of 2,397.
Bulk mortgages, which are commonly sought by developers and larger investors with multiple units, continue to play a significant role in the market. They observed a month-on-month decrease of 15.7%, but still comprise 39.3% of Dubai’s property loan market.
Apartment and villa yields to diverge in H2?
When examining the overall landscape of the Dubai residential property market, average gross rental yields have demonstrated stability, exhibiting a marginal increase of 0.01% to reach 6.7% in April.
Apartments yields in April outperformed the average property recording a 0.06% rise in rental yields, driven by high demand and favorable market conditions.
Conversely, single-family properties, including townhouses and villas, have encountered ongoing downward pressure on rental yields. Townhouses witnessed a decline of 0.04% in yields, while villas experienced a more substantial decrease of 0.23%. Investors should note that villa yields have now reached their lowest level in 9 months.
This divergence in rental yield trends between apartments and yields looks set to be one of the major trends investors will be assessing as we head into H2.