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The world's richest are set to spend $2.5 billion on Dubai property
May 31, 2023
The world's richest are set to spend $2.5 billion on Dubai property Dubai
By   Press Release
  • City News
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Abstract: Exclusive findings from Knight Frank's Destination Dubai 2023 Report.

According to Knight Frank, a global property consultancy, high net worth individuals around the world will spend $2.5 billion on Dubai properties this year. Last year, the emirate spent $3.8 billion on homes costing more than $10 million.


Knight Frank's inaugural Destination Dubai report surveyed 183 high net worth individuals worldwide, each with a net worth of more than $3 million, excluding their primary home or primary residence. The group owns 851 homes around the world and has a combined net worth of $3.2 billion.


The world's rich have increasingly targeted luxury properties in Dubai, mainly in the city's most desirable areas. The report highlighted the city centre (37 per cent) and Palm Jumeirah (30 per cent) as favourites among respondents. Specifically, for high net worth individuals (HNWIs) from the UK/Europe and North America, Palm Jumeirah (15%) and Emirates Hill (16%) emerged as the top locations to purchase a home. For East Asian investors, downtown was an absolute favourite at 53 per cent, followed by Commerce Bay (32 per cent).


Partner Faisal Durrani, Head of Middle East Research, explains: "Dubai has reached a tipping point where the city is not competing for popularity, but is on a par with the world's historic centers as a destination for the world's rich. Outstanding transport infrastructure, unrivalled global connectivity and forward-thinking leadership have seen Dubai's reputation and standing soar globally, as evidenced by the relentless demand of international high net worth individuals to own a second home here or even relocate to the emirate."


The report also highlights a shift in preferences from off-plan purchases to recently built/completed homes. Fifty-three per cent of high net worth buyers focused on buying new build homes, rising to 71 per cent among high net worth individuals from East Asia.


Partner Faisal Durrani, Head of Middle East Research, continued: "Recognizing signs of maturity in Dubai's residential market is challenging as it is only 23 years old. Still, with a surge in second home purchases, especially in places like Palm Jumeirah, the global elite are paying record prices to get their hands on beach homes. They then go on to spend almost the same amount to customise these homes, suggesting that they will be out of the natural cycle of homes on the market for some time, which is exactly what we see in mature markets such as London. In fact, 71 per cent of respondents with a net worth of more than US $10 million intend to renovate or renovate the residences they purchased in Dubai.

Its global status as a luxury residential hub is on the rise


In 2022, Dubai became the fourth most active market for luxury home sales in the world, behind New York, Los Angeles and London. In the first quarter, the city recorded 88 house sales of more than $10 million, accumulating more than Dirham 6 billion. High demand from local and international UHNWIs resulted in an average transaction price increase of 16 per cent for these luxury homes. Well-known communities such as Palm Jumeirah, Emirates Hill and Jumeirah Bay continue to lead the way.

High demand from local and international ultra-high net worth individuals is driving prices for quality homes. In the first quarter, the average price of homes above $10 million reached Dh7,235 per square foot, a 16 percent jump from Dh6,250 per square foot in 2022. Prime residential areas such as Palm Jumeirah, Emirates Hills and Jumeirah Bay Island continued to lead luxury home sales, with prices averaging Dh8,800 PSF in the first quarter.


These prime neighborhoods accounted for 64 percent of residential sales above $10 million in the first quarter, while emerging areas such as the Al Wasl-Dubai Canal corridor and Tilal Al Ghaf show potential as future "prime" locations. These areas are emerging as hot spots for ultra-high net worth individuals in Dubai's real estate market, with several high dollar deals on record.


The city's successful handling of the COVID-19 pandemic and strategic economic stimulus has been cited as key drivers of the remarkable 112% increase in the value of prime residential homes since January 2020.


New findings from the Destination Dubai report reveal an impressive surge in Dubai's residential landscape, with the city's main neighbourhoods, Palm Jumeirah and the city centre, leading the way. According to the report, these sub-markets recorded exceptional growth rates of 25 percent and 15 percent, respectively, last year since the first quarter of 2022. In terms of villas, the pace of growth has been surprisingly consistent, with villas on Palm Jumeirah witnessing the most significant price surge since January 2020, at 126 percent.


These remarkable growth rates underscore the immense strength and potential of Dubai's real estate sector, reinforcing the city's reputation as a global hub for luxury residences.


Interestingly, despite Dubai's reputation for villa lifestyle, the report found that apartments are the more popular type of residential property among HNWIs globally, with 64% preferring apartments. However, 53 percent of those with a net worth of more than $10 million would prefer to buy a villa in Dubai.


In Dubai's current property cycle, the luxury apartment sub-market, namely Palm Jumeirah and downtown, has recorded growth rates of 25 percent and 15 percent, respectively, since the first quarter of 2022. Instead, villa prices have risen uniformly, driven by domestic demand for space and second home buyers from ultra-high net worth groups. However, villas in Palm Jumeirah have experienced a remarkable 126% growth since January 2020, leading the city's rising price trend.

Defining Dubai's prime residential market


The report uses a unique methodology to identify prime neighborhoods in Dubai, a city with five distinct urban centers. Using data from more than 600,000 residential transactions over the past 23 years, the report identifies Palm Jumeirah, Emirates Hill and Jumeirah Bay as key prime communities, marking an important evolution in Dubai's real estate sector.

 The world's richest are set to spend $2.5 billion on Dubai property

Andrew Cummings, partner and head of prime residential at Knight Frank, said: "The feel-good factor goes beyond sentiment, with economic key performance indicators pointing to more than two years of sustained business positivity. In addition, the changing real estate landscape in Dubai, indicating that we are starting to see the emergence of new sub-markets, coupled with the significant demand for luxury properties, means that we will be adding new markets to our Gold index. Tilal Al Ghaf is a neighborhood that has quickly joined the growing list of ultra-luxury areas in Dubai. Three homes sold last year for more than Dh90 million, and seven villas sold for more than $10 million in the first quarter of this year, strongly suggesting that Tilal Al Ghaf will soon meet our definition of a prime neighborhood."


The motivations for buying property in cities are varied. However, for respondents with a net worth of more than $10 million, expanding their property portfolio was the main reason. Importantly, a large proportion of respondents who had never been to Dubai expressed interest in using their property as a second home or investment.


Respondents spent a staggering $2.5 billion on property in Dubai this year, according to the report. Notably, 22 percent of respondents are prepared to spend between $5 million and $10 million, while 8 percent are prepared to spend more than $80 million.


Shehzad Jamal, Partner at Strategic Consulting (Real Estate/Healthcare/Education), said: "Dubai's real estate sector is showing the characteristics of a mature market as it continues to evolve. World-class infrastructure, good connectivity and proactive government policies have attracted the attention of investors from Europe, East Asia and the Americas. People from different jurisdictions are looking to relocate to Dubai, boosting employment and wealth creation rates and further contributing to a stable property market."

Big spenders


According to our survey, high net worth individuals (HNWIs) have strong demand for second homes and investment properties in Dubai. Investment/capital gains "and" second home/holiday home "purchases emerged as the top motivations for this group. Individuals with net worth of more than $10 million are primarily looking to "expand their portfolio."


Respondents have a total budget of $2.5 billion for properties in Dubai this year, with a significant number willing to spend more than $5 million. East Asian buyers showed a higher propensity to spend, with many prepared to set aside more than $20 million.


According to a recent survey of high net worth individuals worldwide, Dubai's high-quality transport infrastructure is cited as the number one reason why the emirate has become an attractive property investment destination. Forty-seven percent of respondents said it was the most important factor.


In addition, Dubai's emergence as a global travel hub since the launch of Emirates in 1985 has made it more accessible to tourists. The city's rebound from the pandemic has been impressive, with visitor numbers expected to exceed pre-COVID-19 levels.


In the first quarter of 2023, 4.7 million visitors passed through the city's gateway. For those who haven't been yet, the top two reasons Dubai is an attractive place to invest in real estate are its status as a global tourist destination (54 percent) and lack of taxes (51 percent).


A key factor boosting Dubai's appeal as a property buying destination was its "wide range of project availability", which was chosen by 38 per cent of survey respondents. For those with a net worth of more than $10m and UK/European HNWIs, this feature emerged as the main factor influencing their choice, at 51% and 38% respectively.


Dubai typically adds around 30,000-35,000 housing units per year, and around 94,000 residential units are currently under construction and expected to be delivered by the end of 2026. This wide range of housing options further cements Dubai's position as an attractive property investment destination.


The UAE was considered a "good investment opportunity," prompting 40 percent of respondents to take an interest in the country, with 37 percent citing its vibrant lifestyle as a key attraction. Despite growing interest in the wider UAE, Dubai remained the top destination with 67 per cent of people interested, followed by ABU Dhabi (21 per cent) and Khaimah Point (5 per cent). This demonstrates Dubai's continued dominance as a lifestyle and investment hotspot.


Dubai's prime residential market remains a global outlier, with record price growth in 2022, albeit from a low base. Dubai's haven status is fuelling the value of gold, the extraordinary diversity of international ultra-high net worth individuals looking for luxury second homes and, of course, the government's world-leading response to the pandemic is fuelling business confidence.

About Knight Frank:


For 126 years, Knight Frank has continued to expand its impressive global footprint and now employs more than 20,000 real estate professionals in 487 offices in 53 regions, making it the world's leading independent real estate consultancy. In the Middle East and North Africa region, with strategic offices in Dubai, ABU Dhabi, Riyadh, Jeddah and Doha, we have been providing integrated residential and commercial real estate transactions, advisory and management services in the Middle East for the past 13 years. To learn more about Knight Frank, visit Knightfrank.ae, LinkedIn and Instagram.

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