Dubai's residential market continues to experience an impressive upward trend, with values increasing by 5.6% in the first quarter of 2023. This marked the ninth consecutive quarter of growth, driven by strong demand for luxury second homes and the city's rise as a global hub for luxury goods.

An average increase of 5.1% was experienced between January and March, reaching Dhs1,450 per square foot. In comparison, flat prices increased by 5.7 per cent in the first quarter to approximately Dh1,230 per square foot.

Faisal Durrani, Partner - Head of Middle East Research, explained: "Despite this strong rate of growth, prices are still lagging behind the 2014 peak by 15 per cent. Flats are recovering at a slower pace, still trailing the last market peak of 18 per cent seven years ago. Villas, on the other hand, have matched their 2014 peak and remain highly sought after, particularly at the upper levels of the market, where prices are now 15% higher than in the first quarter of 2022, with growth even more pronounced in prime neighbourhoods."

Prices in Dubai Hills and Emirates Hills, for example, have risen sharply as domestic buyers' demand for larger homes fuels demand, particularly in more affordable inland communities. Flat prices in Dubai Hills have risen by 23 per cent in the past 12 months, making it one of the city's strongest rising areas.

The Palm Jumeirah has been the city's top-performing villa market, with prices rising 14 per cent in the first quarter and 53 per cent over the past 12 months. Prices for villas on the iconic Palm Jumeirah have increased by an impressive 126 per cent since the start of the pandemic, according to Knight Frank.

Andrew Cummings, Partner and Head of Premier Residences at Knight Frank, said: "Continued strong demand for luxury homes from the international elite has contributed significantly to a 44% increase in the average price of villas across Dubai since January 2020. This level of growth brings villa prices to their last market peak in 2014, demonstrating the rise of Dubai as a leading global luxury hub."

Branded residential sales have seen a sharp rise since the pandemic, driven by demand from ultra-high net worth individuals. Developments such as the Al Baqarah Apartments in Downtown Dubai have achieved record prices, highlighting the growing popularity of branded residences in the city.

According to a report by Knight Frank, Dubai's premium residential market is expected to experience the highest growth rate of any premium residential market in the world, with a projected growth rate of 13.5% in 2023. This growth is supported by a clear imbalance between supply and demand and a positive economic backdrop.

Andrew Cummings, Partner and Head of Prime Residential at Knight Frank, continued, "Current market conditions, combined with a return to stable and sustainable growth, will instil confidence in homeowners and investors alike."

Faisal Durrani, Partner - Head of Middle East Research, concludes: "Three and a half years into the current market cycle, overall price growth is slowing as the extraordinary growth seen during the pandemic begins to fade. However, the bottom line remains a significant mismatch between demand and supply for luxury properties. This combined with Dubai's emergence as the preferred second home market on the global stage continues to drive prices, which is why prices have risen by 13% in the last 12 months, outpacing the 10% growth seen in 2022."