The current boom in Dubai’s real estate market
Dubai is currently experiencing an unprecedented boom in the real estate market, with 2023 predicted to be the busiest year on record. According to the latest reports from the Dubai Land Department (DLD), real estate sales in the first half of 2023 amount to an impressive AED 62.3 billion (USD 16.9 billion), representing a significant year-on-year increase. This momentum is fueled by a variety of factors, including the comparatively affordable property prices, thriving economy and high quality of life in the region. The advantageous investment environment also significantly minimizes the risk of a real estate bubble in the city.

Understanding a real estate bubble and Dubai’s experience
A real estate bubble occurs when there is a significant discrepancy between the actual and justifiable value of real estate caused by factors such as a mismatch of supply and demand, inflated prices and poor mortgage rates. The U.A.E. experienced the effects of a burst real estate bubble during the global crisis of 2007-2008, which led to a drastic decline in sales and real estate prices. Many development projects were halted and numerous developers went bankrupt. This had far-reaching effects on the country’s economy, including rising unemployment and financial burdens on households.

Driving factors behind the current upswing
The current upturn in the real estate market is due to a rapid economic recovery following the COVID-19 pandemic, with Dubai standing out as a preferred destination to live, work and invest. The city’s ambitions are high, supported by the ten-year strategic plan D33, which aims to double economic output and establish itself as one of the leading global financial centers by 2033. DLD data shows the positive development with a total of 60,440 registered sales transactions in the first half of 2023, which corresponds to a total value of AED 177.3 billion (USD 48.3 billion). In comparison, 43,200 transactions worth AED 115 billion (USD 31.3 billion) were registered in the first half of 2022.

Attractive real estate prices
The attractive real estate prices in Dubai stand in contrast to other major global cities. For example, a luxury 2-bedroom apartment in Dubai can be purchased at a fraction of the cost of a similar apartment in cities such as London. These price advantages, coupled with generous space offerings, make the Dubai real estate market particularly enticing for buyers.

Increasing demand for off-plan projects
The increased demand for off-plan projects is a sign of the low supply of ready properties. Recent projects such as Palm Jebel Ali, Dubai Expo City and The Oasis are proving popular, with developers keen to offer residential units at competitive prices. This significantly reduces the likelihood of a market slump, even when new real estate deals are available.

Population growth
The population in Dubai is currently experiencing an upswing, mainly due to in-migration. In April 2023, the population exceeded 3.5 million, driven by a thriving economy and tourism industry as well as attractive educational opportunities. In addition, the Golden Visa and Remote Work Visa programs are attracting a growing number of expats.

Quality of life
Dubai has established itself as one of the preferred cities for expats, thanks to a high standard of living and easy integration. In addition to real estate prices, aspects such as security, governance, tax benefits and general lifestyle are important factors in the city’s appeal.

Forecast: Is a real estate bubble in sight?
Despite rapid growth, the real estate market in Dubai currently shows no signs of a bubble. Current market dynamics point to a stable and sustainable growth path, with realistic valuations and a healthy ratio of buyers to mortgagors. The UBS Global Real Estate Bubble Index 2022 confirms this assessment and rates Dubai as fairly valued, with one of the lowest bubble risks globally.

Conclusion
Dubai is positioning itself as one of the most attractive destinations for real estate investment globally, supported by robust population growth, excellent quality of life and increasing demand for off-plan projects. The likelihood of a real estate bubble remains low, making the market attractive for both homebuyers and investors.