Constricted Supply: The Growing Challenge in Acquiring Dubai’s Luxury Homes
Supply Decline: The availability of luxury homes in Dubai's prime markets has decreased by 47% over the past year.
Affected Areas: Emirates Hills, Jumeirah Bay Island, Jumeirah Islands, and The Palm Jumeirah are the most impacted.
Investor Behavior: Many investors are holding off on selling to capitalize on potential value increases.
High Demand: Persistent high demand from wealthy individuals is outstripping the available supply.
Capital Influx: In 2024, $4.4 billion of global private capital will target Dubai’s residential market, a 76% increase from 2023.
Price Increase: Average transaction prices in affluent neighbourhoods rose to Dh3,706 per square foot, up 7% from the previous year.
Prime Sales: The Palm Jumeirah accounted for 89.3% of the prime property transactions.
High-Value Sales Growth: Sales of homes valued over $10 million grew, with 190 transactions recorded in H1 2024.
Market Dominance: The Palm Jumeirah led with 21 sales over $10 million, highlighting its status as a luxury hotspot.
$25 Million Homes: Sales of homes priced above $25 million increased by 25% in the last three months.
Dubai’s luxury real estate market is experiencing a significant contraction in supply, driven by high demand and strategic investor behavior. The availability of luxury homes in prime areas such as Emirates Hills, Jumeirah Bay Island, Jumeirah Islands, and The Palm Jumeirah has dropped by 47% over the past year, according to a recent analysis by Knight Frank.
The persistent demand from high-net-worth individuals is outstripping the supply of luxury homes in the emirate. Faisal Durrani, Partner and Head of Research for MENA at Knight Frank, notes that the global super-rich are overwhelmingly fixated on Dubai, contributing to the reduction in available properties. This trend is reinforced by findings from the 2024 Destination Dubai report, which indicates that $4.4 billion of global private capital is targeting Dubai’s residential market this year, marking a 76% increase from 2023.
Dubai’s prime residential market has also seen a surge in performance, with average transacted prices in affluent neighborhoods rising to Dh3,706 per square foot during the first half of 2024, a 7% increase from the same period in 2023. The Palm Jumeirah continues to dominate prime property transactions, accounting for 89.3% of deals in H1 2024, followed by Jumeirah Islands, Jumeirah Bay Island, and Emirates Hills.
The luxury home market, particularly properties valued over $10 million, remains robust. Knight Frank reports that Dubai registered a record 431 sales of homes above $10 million in 2023, significantly outpacing London, the next closest contender. In the first half of 2024, Dubai saw an additional 190 transactions in this price bracket. However, the number of $10 million-plus home listings has fallen by 65.5% over the last year, leaving only 460 properties available.
This scarcity is attributed to a shift in investor strategy. Unlike previous market cycles characterized by quick flips, international high-net-worth individuals are now focusing on purchasing homes for personal use, leading to a ‘buy-to-hold’ mentality. Anecdotal evidence suggests that these investors are waiting for potential future gains before selling, further constraining supply.
The total value of $10 million-plus homes sold in the first half of 2024 totaled $3.2 billion, building on the $7.7 billion recorded in 2023. The Palm Jumeirah led in terms of both the number and value of luxury home sales in Q2 2024, with 21 deals worth over $10 million, totaling $365 million.
At the very top of the market, demand for $25 million-plus homes remains strong, with sales in this category growing by 25% in the last three months alone. Will McKintosh, Regional Partner and Head of Residential, MENA, highlighted the remarkable increase in sales of these ultra-luxury homes, noting that the average annual sales for this category between 2015 and 2021 were less than three.