March continued to show the Dubai property market is enjoying its third major growth cycle with over 12,000 transactions recorded. That’s enough volume to make it the 4th best month of investment ever in Dubai.
Dubai real estate investment statistics in March 2023
- Huge surge: 50% year-on-year and 30% month-on-month increase in transaction volumes
- Signs of sustainability: The market recorded the third consecutive month of controlled price growth with capital values increasing by an average of over 0.6%
- Off-plan confidence: Another month with substantial off-plan transaction activity and Dubai new project launches set to hit 90,000 by the end of this year
- Lender support: Banks continue to finance real estate transactions in a big way, and the rise of bulk portfolio loans is significant
- Underlying tenant demand: Investors are supporting capital growth with strong yields of around 6.5% looking like a robust level of return for the coming months
Record levels of Dubai property investment
The 12,304 sales in March 2023 were enough to set the month apart as the strongest March on record. In fact, the figure represents the fourth-highest monthly sales figure ever recorded in the Dubai market.
Transaction activity continues to be propelled by the residential market. Investor sentiment continues its trajectory from villas to apartments following the end of global lockdowns.
Apartments recorded a massive 50% increase in transaction volumes, and alongside townhouses, and villas, the residential market accounted for 91.5% of the record total figure.
In the smaller commercial market, hotels and serviced apartments accounted for almost 4% of the market, with office units and land transactions recording around 2% of transactions each.
Signs of stability amid a monthly surge
March 2023 was perhaps the most significant sign yet that this 3rd growth cycle will be the most sustained and mature in Dubai’s history.
Despite the 12,000 units changing hands, a 30% uplift on February 2023’s data, prices continued to remain more controlled. The 0.62% increase in capital values was the third consecutive month in which price increases have been at the solid 60 basis points mark, a mark that points to healthy and considered investment activity and market.
For full context, this needs to be compared to the proceeding years of this 3rd cycle, in which monthly price appreciation averaged 1.33% and 0.92% in 2021 and 2022 respectively.
Back then, it could be argued that the market was fuelled only by Dubai’s response to the pandemic and the global high-net-worth race for space. Thousands of villas were sold and prices soared.
March 2023’s combination of more reserved growth, and a varied mix of property types being sold at record levels shows the underlying strength and stability of the market.
Dubai's off-plan demand remains strong
More than 6,500 off-plan transactions were recorded on the official Oqood portal. That’s the single highest monthly total in over 13 years and represents a 43% month-on-month increase on February 2023’s figures.
The off-plan volume increases now mean that they account for more transactions than the secondary market in Dubai – it’s 52.9% off-plan and 47.1% title deeds. And those are only the official figures. Away from registration technicalities, it is more likely that off-plan transactions now account for almost 6 in 10 property transactions in Dubai.
Again, further analysis of the data points to strong market fundamentals. The majority of off-plan sales in the Dubai market can be attributed to transactions for properties completing within 12 months. This represents solid investment activity and is far from the potentially more alarming activity seen in the past when large proportions of off-plan sales were speculative and completed many years in advance of the assets’ delivery.
In March, off-plan resale activity accounted for 22.2% of the resales market, which is 6% on February’s 28.3% figure.
Exits and resales
Meanwhile, the wider resales market continues to be dynamic. Over 6,000 transactions were recorded, which is a small decrease of 5.6% month-on-month.
Mortgage activity hits record levels
In perhaps one of the most reassuring signs of stability yet, the volume of loans issued for Dubai property purchases passed 4,200 in March, which represents the highest figure on record.
What is particularly noteworthy about the timing is that, globally, and in many other prime real estate markets across the world, mortgage lending is hampered by a high-interest rate environment.
Although institutions offering leverage to individual investors could be viewed as widespread belief in the market, it should also be noted that most of the lending activity was propelled by the bulk mortgages segment of the market. This is where lenders offer loans to developers and larger institutional or corporate investment entities and it is not totally comparable with the individual investor lending that dominates other global markets.
That said, bulk lending, although observing a 55% month-on-month increase, still only accounts for just under 17% of the lending market.
Yields settle at 6.5%
Like any varied and large property market, there is significant fluctuation around the expected yield in Dubai, but investors can be quite confident that average yields will settle at the 6-7% figure in the medium term, with apartments still continuing to outperform villas and townhouses.
In fact, as far as yields and rental returns are considered, it does look like the post-covid villa market is running out of steam a little, and there may be some letting rate correction here in the coming months.
Outlook from March 2023
March 2023 was in many ways, and many metrics, a record month for Dubai property investment, and points to mature and sustained growth in the future.
Investors should watch off-plan activity carefully. The market is now welcoming more supply than at any point in the last year years and absorption rates will be key in the coming months as investors look to isolate the best-performing sectors and locations in the wider market.
