Dubai in a global context

Branded residences remain a rapidly expanding segment of the total stock in Dubai, with such products exhibiting sustained demand, writes Kelcie Sellers from Savills World Research

The advent of branded residences in Dubai 

After its establishment in North America, the branded residences concept gradually gained a foothold in EMEA markets and has exhibited accelerated growth since 2005. Growing from seven schemes in the region in 2005, the sector now accounts for 209 schemes and is forecast to expand a further 83% by 2030. 

Dubai has the largest number of completed schemes in the world and the most schemes in the pipeline for any market globally, with projected growth of 72% over the pipeline period to 2030. A strong domestic and international supply of buyers searching for quality assets with lock-up-and-leave potential has significantly boosted the growth of branded residential schemes in Dubai over the past decade. Brands also view Dubai as a key market to launch new concepts – the city is host to the only schemes from Pagani and de GRISOGONO, with other one-of-one schemes in the pipeline to be delivered in the coming years.

According to Rico Picenoni, Savills’ global expert on branded residences based in Dubai, “the multitude of brands active in the residential space in Dubai, a city that has demonstrated more than 16 percent compound annual growth in branded residential development over the last 20 years, is remarkable”.

When talking about branded residential developments, it is important to reference the prime residential segment overall.

Global prime residential performance 

The prime residential markets in 2022 experienced a year of two halves. Having seen a significant rebound in the wake of the pandemic, prime residential price growth was sustained through the first half of 2022; however, the rate of growth slowed in the second half of the year as the global economic environment weakened and interest rates rose. This was reflected in the Savills Prime Residential World Cities Index, which saw capital values rise by an average of 3.2% across 30 cities, with the second half of the year only contributing 0.7% to the annual growth figure.

Prime rental markets were a bright spot last year. Across the Savills Index, average prime rental values increased by 5.9% in 2022. This was driven by a lack of stock and rising demand, with rents outperforming capital values. Gateway cities, such as Singapore, New York and London, together with rising hubs Dubai and Lisbon, saw rental values increase in excess of 10% year-on-year.

Dubai’s prime residential markets 

Despite the slowing transaction volumes towards the end of 2022, in 2023 we expect to see momentum in some cities. Dubai has excelled as a market for capital value and rental growth. The city ranked among the top three cities for growth in 2022, with average annual capital value and rental value growth of 12.4% and 22.9%, respectively. The mainstream market saw price growth slow, but remain positive for the year. Dubai has been a beneficiary of the global trends which see people looking to move to locations with warmer climates, comparatively lower costs of living and an efficient tax environment both during and after the pandemic. 

Over the course of 2022, there were more than 2,190 transactions for properties above the AED 10 million threshold, displaying growth of almost 63% annually. Close to a quarter of these high-value transactions occurred across Palm Jumeirah, followed by Dubai Hills Estate, Downtown Dubai and Emirates Hills. 

There were also 29 transactions above the AED 100 million price point recorded throughout the year across locations such as the Signature Villas on the Palm Jumeirah, Bulgari Ocean Mansions and customised villas across Emirates Hills. As a result of the sustained demand for luxury developments, capital values across the segment have increased by an average of 13% year-on-year in 2022, following a 21% increase in 2021. There are also micro-markets and projects in the city where prices have increased by more than 25% year-on-year. 

The UAE as a whole has also seen continuous transaction volume growth since mid-2020 when transactions hit their low point during the Covid-19 pandemic. Overall, the market witnessed a 73% jump in transactions during 2021 followed by a 60% increase in 2022. So far in 2023, transactions are already up by 46% compared to the same period last year. 

While both capital values and transactions have grown in Dubai in recent years, when compared to prime markets in other World Cities, Dubai’s prime residential property offers comparative value. The average price per square foot in Dubai totals $730 – five and a half times lower than the average price in Hong Kong, three times lower than average prices in New York City and two and a half times lower than prices in London. 

The market has also faced a shortage of stock of prime properties with interest coming from both domestic and European buyers. The strong surge in international residential demand can largely be attributed to policy changes made to the long-term residency visa regulations, along with relatively low price points and lower lending rates. 

The prime rental markets in Dubai have benefitted from an influx of residents attracted to the city’s climate, quality of life on offer and its strong business environment. New residents of the city will often choose to rent a property as they experience the Dubai lifestyle and decide on their preferred city district. These new residents are supporting rental pricing in Dubai with prime rents up 22.9% over the course of 2022. By 2030, the number of households with incomes over $250,000 per year is forecast to double to nearly 50,000 – further supporting both prime rents and prime capital values in the city. 

There is a general optimism in the Dubai residential real estate market which is likely to persist into 2023. With forecast capital value growth of +6% to 7.9%, the city’s continued demand through 2023 will likely be driven by the increasing ease of gaining residency, a positively growing economy and a comparatively attractive location for foreign investment and residents. Prime property prices will therefore continue to increase, albeit at a slower pace than in 2021 (17.4%) or 2022 (12.4%), as prime residential property remains a perceived safe haven for wealth preservation. 

About the Author

Kelcie Sellers is an associate on the World Research team, with a focus on global property trends, prime residential and resort markets, as well as the role of cities in the property markets. She has also written extensively on global office market trends. Prior to joining Savills, Kelcie worked in property and economics in the United States.

Kelcie holds a BA in Economics and Political Science from Agnes Scott College in Atlanta, USA and a Master’s degree in International Relations from IE in Madrid.

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