The Dubai real estate market continued to perform well in the second quarter of 2023, with the second highest number of transactions on record, up 37% year-on-year. The surge in transactions was driven by an increasing number of high net worth individuals seeking safe havens, tax efficiencies and positive investment returns.

According to the latest Dubai Land Department figures published by Better Homes, the number of real estate transactions in the second quarter reached 27,215, with the total value of properties sold reaching Dh69.8 billion.

The growth in transactions in the second quarter was driven entirely by apartment transactions, which increased by 57 percent as individuals chose to purchase apartments rather than face rising rental costs. High Net Worth Individuals (HNWIs) from India and the UK remained the largest buyers of real estate in the second quarter.

"Given our strong performance in 2023 and the number of MOUs signed, we expect transaction volumes to remain strong in the third quarter," wrote Richard Waind, Managing Director, Betterhomes Group, in the Q2 2023 Residential Market Report.

"Looking ahead to the second half of the year and beyond, Dubai will continue to be a major beneficiary of increased global migration of high net worth individuals and capital. Strong GDP figures, population growth and high returns on investment are set to continue and the long-term forecast for the Dubai real estate market is very healthy," Waind said.

In the first half of the year, Dubai recorded 61,000 sales transactions with a total value of Dh179.34 billion, according to a research report by W Capital." Walid Al Zarooni, CEO of W Capital Real Estate Brokerage, said, "The real estate sector continues to set new records in terms of sales and transactions." He added: "The first half of the year recorded the best six-month performance in history, benefiting from supportive market factors and continued economic momentum.

The sudden rise in real estate investment by high net worth individuals between 2012 and 2022 has put the Dubai real estate market on track to achieve Dh300 billion in sales this year. According to a report by Unique Properties, there are more than 68,400 HNWIs in Dubai, a 62 percent increase over the past decade.

Transactions of villas and townhouses declined by 9.0%, mainly due to limited supply in the secondary market and a lack of new villa communities being launched. Rising prices and strong demand continue to spur developers to launch new projects, with more than 34,000 units launched so far this year.Betterhomes reported a 67% increase in off-plan transactions compared to Q2 2022, while sales on the secondary market increased by 15%.

The report notes that mortgage demand remains strong, accounting for 41% of secondary transactions in the last quarter." While we can expect interest rates to tighten further, more positive inflation data in the US suggests that we are very close to the peak of the current tightening cycle. Any confirmation in the coming months that rates have peaked, and possibly even a rate cut in early 2024, could provide additional support for demand beyond 2023."

The report says the supply of existing homes remains tight, putting pressure on both sales and rental prices, but with more than 30,000 new homes launched in the first half of the year, it is on track for a record year." New stock from the post-Covidien surge in development is likely to have a significant impact on the supply of liveable homes only in 2025-2026, so tenants are unlikely to see any easing of rental price rises in the medium term."

Strong demand and limited supply of new homes continued to push up prices in most neighborhoods last quarter. Dubai Production City saw the strongest growth in apartment prices, up 23%, while Living Legends and Al Habtoor City were the top three communities in terms of apartment price increases in the first quarter, up 21% and 13% respectively. Villa prices in the Jumeirah Islands were the fastest growing, up 13% sequentially and 32% year-on-year. Popular expatriate communities also saw significant growth in villa prices, with JVT, JVC and Dubai Hills seeing increases of 6%-9%.