Dubai’s ever-growing population has been a catalyst for the increased demand in real estate. When we take a closer look at this trend, there are multiple variables that come into play, but before that, a steady reality remains: the UAE possesses substantial potential for continued growth within the real estate market.
Therefore, it is plausible to anticipate a sustained increase in demand as the intricate interplay between consumer behaviour and evolving market dynamics unfolds. To put this into perspective, average sale prices surged by 14.5 percent while apartment and villa rents experienced an even bigger rise exceeding 25 percent each – and in rare cases even going up to a staggering 50 percent.
Amidst this surge in real estate prices, the question emerges: how do consumers respond to this change? The market portrays a spectrum of trends, where some expatriates and citizens can accommodate the elevated costs, while a notable proportion needs to adopt innovative approaches in order to navigate this shift.
These evolving patterns in consumer behaviour not only shed light on the current scenario but also offer a glimpse into the future. They serve as valuable insights that can empower developers and industry pioneers to sculpt a collective future that reaps rewards for all stakeholders involved.
Transition of renters towards long-term investments
Both purchasing and rental rates have experienced an upswing, yet a closer examination reveals a compelling trend: in the long-run, renting often proves to be more financially demanding than buying, prompting a transformative shift in the decision-making landscape for renters.
Faced with these soaring costs, renters are increasingly inclined to redirect their monthly expenses towards the pursuit of ownership. This shift has also contributed to the 46.7 percent jump in residential sales in the first half of the year, compared to 2022.
As the preferences of Dubai renters pivot towards ownership, it becomes imperative for the real estate industry to grasp their clientele’s evolving mindset. To capitalise on this shifting dynamic, developers can strategically enhance property sales by introducing compelling financing alternatives that complement the current range of mortgage selections.
This proactive strategy not only aligns with individuals who hold reservations about cash transactions but also accommodates those who face constraints in managing upfront lump sum payments. By offering such attractive financing options, the real estate sector can not only meet the evolving demands of potential buyers but also potentially expedite property sales to a greater extent.
Investing in off-plan properties for maximised returns
The evident increase in property acquisitions and ownership is also evolving, with consumers now considering real estate as a strategic avenue for investment. Therefore, one prominent trend to monitor is the rising interest in off-plan properties, driven by their numerous advantages such as flexible payment plans, accessible financing options, and the potential returns on their investments.
With consumers who are looking for real estate investments, off-plan properties, particularly apartments, have emerged as a rising trend. In the first half of 2023, Dubai witnessed a 38 percent increase in off-plan transactions. Alongside various advantages, including potential returns of up to 10 percent, off-plan properties are capturing consumer attention as a lucrative investment opportunity.
Locations such as Jumeirah Village Circle (JVC) have emerged as a highly favoured choice, offering an enticing return on investment (ROI). Attracting not just investors, but also families and a diverse range of individuals, it provides easy access to transportation (metro and highway), schools, community engagement, restaurants, and other vital amenities.
This unique blend of benefits situates the area as a lively and desirable destination, catering to an array of needs and lifestyles. This appeal is substantiated by the significant uptick in rental prices for apartments within the area, experiencing a remarkable surge of 15 percent to 18 percent during the first half of 2023.
In order to optimise gains, it is crucial for developers and leaders in the real estate sector to effectively market their off-plan properties to both industry investors and end consumers. By adopting this approach, developers can expand the reach and the impact of their offerings, aligning their strategies with the evolving popularity in off-plan properties.
The remote work influence
Dubai’s socio-economic landscape hinges significantly on expatriate workers, constituting more than 90 percent of the total workforce. Consequently, the real estate market resonates closely with the preferences of these expatriate residents, encompassing a substantial majority.
Presently, in response to the transformative impact of remote work, the very essence of homes is undergoing a transformation, with spaces now becoming multifunctional hubs that emphasise the significance of securing an appealing property to elevate the overall quality of life.
This demographic group is therefore embracing the concept of transitioning from bustling city centres to areas that introduce new developments, blending economic viability with elevated residential choices.
This shift has propelled areas such as Jumeirah Village Circle (JVC) into the spotlight this year, fuelled by its suburban charm, communal aspirations, and urban-inspired living experience. Within this strategic framework, developers are poised with a unique opportunity to invest in regions where property prices may be comparably more affordable, all while ensuring the delivery of the quintessential Dubai lifestyle experience, especially for those who are engaged in remote work situations.
Apartments back in popularity
In 2020 and 2021 – the aftermath of the Covid-19 pandemic, villas witnessed a surge in popularity within Dubai’s real estate market. However, as property prices continue to rise, apartments have once again become the preferred choice among consumers. The yearly sales data for 2022 shows that a total of 86,490 residential sale transactions were recorded, of which, 62,363 were apartments.
Besides their attractive affordability compared to villas, the renewed preference for apartments can also be ascribed to the convenience and comfort they extend to expatriates, particularly to couples without children or individuals. Additionally, apartments exhibit a faster rental turnover compared to villas, prompting consumers to lean towards investing in apartments with a forward-looking perspective, possibly considering future rentals.
Therefore, by strategically directing their attention towards constructing apartment buildings in sought-after and economically viable zones such as JVC and Al Furjan, developers can potentially gain substantial rewards by catering to a wide range of consumers.
The main takeaway
As consumer trends undergo constant evolution across all sectors, it becomes crucial that the real estate industry not only accounts for industry trends but also consumer behaviour when making investment and development decisions.
Dubai, being a dynamic market that evolves in tandem with its consumers, necessitates a harmonious growth strategy that resonates with both the evolving market and the changing preferences of its consumers. By staying attuned to such a strategy, we ensure a beneficial synergy that propels Dubai, its people, and its real estate endeavours to greater heights.