Soaring demand for luxury homes has propelled Dubai above the more established centres for prime property for the first time, as the Gulf business hub’s post-pandemic rebound continues to attract the world’s wealthy, including Russian buyers.

Dubai was the busiest market for $10mn-plus homes in the first quarter of 2023, with 92 deals worth $1.7bn, according to research by real estate consultancy Knight Frank. By comparison, Hong Kong had 67 transactions valued at $988mn, New York raised $942mn in 58 deals and 36 sales were completed in London worth $736mn.

Many of the world’s richest individuals are turning to Dubai as a financial haven, as they compete to snap up a limited stock of high-end properties. “Dubai’s luxury homes market continues to attract the attention of the world’s wealthy,” said Faisal Durrani, Knight Frank’s head of Middle East Research, adding that many were second homes. Over a five-year period, the number of sales of $10mn-plus homes in Dubai has risen seventeen-fold.

On an annual basis, London claimed the top spot last year with 246 $10mn-plus homes sold for $4.7bn, compared with the $3.9bn raised in Dubai in 224 transactions.

The sanctions imposed on Russia and some of its leading businesspeople in the wake of last year’s Ukraine invasion have hastened the influx of wealthy residents to Dubai from both countries. The United Arab Emirates, which has close ties to the US and Russia, has remained neutral in the conflict, saying it welcomed non-sanctioned Russians.

The Russian population of the UAE has risen fivefold since the invasion to as many as 500,000, according to unofficial estimates circling in the expatriate community.

“Russian demand is still strong, but now mainly in the ultra-luxury segment,”

“Many are relocating from places such as Switzerland and Great Britain. They often buy full-floor penthouses with double high ceilings, overlooking the water.”

The value of sales of $10mn-plus properties rose to $3.1bn in the first half of this year, from $3.9bn raised in the whole of 2022. According to Knight Frank, the value of prime residential real estate rose 44 per cent last year, with a further 11 per cent rise in the first half.

Some market participants fear Dubai’s third real estate boom in the past two decades will turn to bust, as occurred after the financial crash of 2009 and the oil-price-related slowdown from 2014. But Durrani said there was “nothing in the data, or economic trajectory, to suggest a cliff edge moment is approaching.”

The luxury home boom has rippled through the broader property market, helping to drive up apartment and villa prices by 15 percent and 46 percent, respectively, at the end of June, compared with the previous year period, according to Knight Frank.

This has pushed up housing and rental costs for less-wealthy residents as more professionals and blue-collar workers move in as business activity confounds economic slowdowns elsewhere.

Along with steeper food bills and higher school fees, this now threatens to undermine Dubai’s competitive advantage in attracting expatriate labour.

“There still remains a strong desire for professionals to move to Dubai,” said Monica Malik, chief economist of Abu Dhabi Commercial Bank. “However, the higher rent and education costs is a squeeze to more mid- and lower-income households.”