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As the Dubai real estate market continues its upward trend, fueled by significant growth over the last few years, there has been a slight shift in the market which is not only evident in the various data sets but also in daily real estate activities across the streets of the emirate, said an industry expert.
Following the post-Covid surge in record-breaking transactions and an influx of foreign investors, the real estate market is now slowly showing signs of realigning with market norms rather than the anomalies in demand seen in previous years, remarked Lynnette Sacchetto, the founder of RealTrust, a Dubai-based real estate solutions provider.
While the market continues to grow month-on-month, it is beginning to slow down, a trend likely to continue over the next year. This shift will be further influenced by multiple underlying factors, such as new supply entering the market and sellers adjusting their asking prices as they realise their properties are not worth the inflated values of previous years.
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These inflated prices were driven by low supply in some areas and segments and high demand, which has now dissipated, stated Sacchetto, an expert with a 18-year track record of specialisation in Dubai’s PropTech industry.
While analyzing the real estate market, she said it was important to note that though sales transaction data forms the basis of market analysis, it does not fully capture immediate market shifts and trends due to a lag in real-time market conditions.
"Once a deal is agreed upon, it must go through a comprehensive transaction process that can take 3-4 months to complete. This is true for ready/secondary market transactions and off-plan transaction registrations.
Subsequently, the data needs to be analyzed and reported, adding further time to the timeline. Therefore, other data sets such as listing data, supply data, demand data, mortgage data, and off-plan developer data need to be analysed in parallel to gain a more accurate and timely understanding of market dynamics," explained Sacchetto.
Examining the property listing data reveals one of the first indicators of a market shift that began at the end of last year, she added.
According to Reidin, a UAE real estate data platform, since September 2023, the median residential listing price value started to decline month-on-month by an average of 5%. This was the first sign that the market was transitioning from a seller’s market to a buyer’s market, a reality we is now being seen.
Another indicator was the average days on market for a residential sale listing, which has increased from a strong 30 days last year to over 90 days today, indicating a more stagnant residential sales listing market as of Q2 2024.
This trend in the listing data is now starting to reflect in the transaction data, it added.
According to Dubai Land Department open data for Q2, there had been a 2.9% quarter-on-quarter slump in the secondary/ready market residential sales transaction volumes. This marked the second consecutive quarter of decline in this segment.
"Looking more closely at Q2 performance, we observed a total of 40,936 sales transactions worth AED118 billion ($32.2 billion) marking a 10% increase q-o-q and a 36% increase year-on-year in overall sales transaction volume across all segments," said Sacchetto.
In the breakdown, 65% or 26,642 sales transactions were for off-plan, while 35% or 14,294 sales transactions, were in the secondary/ready market, she stated.
According to her, the significant increase in off-plan property launches and completions will play a vital role in shaping the Dubai real estate market's future, as these developments are expected to have a substantial impact in the upcoming years.
In 2023,107,145 new residential units were launched in Dubai, and in 2024, we have seen 78,361 new units launched thus far. These figures are clearly reflected in the off-plan sales transaction data for Q2, with an 18% increase quarter-on-quarter and a 64% increase year-on-year in off-plan sales.
However, it is important to note that while sales volumes are increasing, the median off-plan sales price in Q2 was AED1.54 million, representing a marginal 0.6% decline from Q1 and the second consecutive quarter decline in off-plan median sales price, stated the expert.
"Additionally, individual sellers in these off-plan projects are struggling to sell at opening prices (OP) which is the prices they originally bought for, or below, to avoid the next developer payment they cannot afford, opting to take a loss instead of the premiums they were promised when they originally purchased at the peak of the market in 2022 and 2023," noted Sacchetto.
This has been a common scenario over the last few months and likely to increase over the coming quarters and years as a significant amount of off-plan supply begins to transition in the pipeline, she added.
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