Prices in Dubai’s top property market to slow in 2023 but will lead globally

Last year, Dubai’s high-end homes market outperformed most of its global peers: Savills

Dubai’s property market is expected to lead the global price charts in 2023 as it continues to attract high-net-worth individuals (HNWIs), but rising interest rates and sustained headwinds are likely to soften the demand.

Across the emirate, prices of high-end homes will jump by 6% to 7.9% this year, the highest in the world, according to real estate consultancy Savills. However, Dubai’s capital value growth, which will be similar to Singapore’s, is lower than the 12.4% increase recorded last year.

The pace of growth in Dubai, as well as Singapore, will outrank those in Miami and Milan, where prices are likely to increase by around 4% to 5.9%, as well as Cape Town and Rome, which are both expected to record a 2% to 3.9% increase this year.

“Both cities (Dubai and Singapore) will continue to see sustained inflows of high-net-worth individuals; however, they are not immune to higher interest rates and wider economic headwinds,” Savills said in its report.

The real estate consultancy said Dubai’s forecast prime price growth for this year “is rather muted” compared with last year. Other markets are also expected to experience a slowdown over the next several months.

“Overall, many of the prime residential world city markets are set for a slowdown in 2023 with an average price growth of 0.5% forecast across the 30 global cities monitored by Savills,” the report said.

Interest rates 

Interest rates have been rising since last year as the Federal Reserve rolled out a series of price hikes in a bid to tame soaring inflation. Last month, central banks delivered another rate hike, with the UAE imposing a 25 basis-point increase on overnight deposits.

“Recessionary conditions, a higher interest rate environment and inflation will weigh on prime residential performance although the second half of the year holds some potential for global economic growth,” said Paul Tostevin, Head of Savills World Research.

“The forecast growth of 0.5% is some way down from the 3.2% we saw last year; however, the rarefield nature of prime residential, coupled with a lack of stock, will prevent a sharper slowdown, Tostevin added.

Savills had tracked 30 major global cities for its World Cities Prime Residential Index. Out of the destinations included in the study, 17 are likely to record slower growth this year than in 2022. However, 13 out of the 30 cities are forecast to record equal or even slightly enhanced growth in 2023.

Last year’s performance 

Dubai’s overall price growth of 12.4% last year was the second highest in the world after Miami, which posted an increase of 25.4%.

“Miami and Dubai recorded the highest level of capital value growth in 2022… These markets are still relatively competitively priced by global standards, the low cost of living, tax regime and warmer climates attracting international and domestic buyers,” the report said.

Other global hubs, such as Singapore and New York, also performed well last year, recording capital value growth of 6.8% and 6.1%, respectively. New York, in particular, benefited from an influx of HNWIs setting up businesses.

As of June 2022, Dubai is home to 67,900 millionaires. Most millionaires are living in high-end communities like Jumeirah First, Al Barsha, Jumeirah, Arabian Ranches and Al Thanyah, according to strategy consultancy Webster Pacific.