Residential property transactions in Dubai jumped to their highest level since 2013 in the first half of this year, as people sought to buy larger homes, leading to rising prices in a market that had been struggling with oversupply for years. The average home prices increased by 2.8% in the first half of the year ending in June, a result of strong demand supporting the market, significantly contributing to price improvements, according to the real estate consultancy CBRE Group Inc. Taimur Khan, head of research at CBRE, stated, "Given the strong demand supporting the market, we have seen prices improve markedly." However, the increase comes from a low base compared to prices in June 2020 when the world was grappling with lockdowns.
**Strong Demand for Luxury Homes**
CBRE reported that transaction volumes rose in the first half, soaring by 69.2% and 46.4% compared to the same periods in 2020 and 2019, respectively. Luxury homes in Dubai, mostly single-family houses known as villas, saw increased demand and led the rise in average prices. The luxury market has been revitalized in a city that has become a haven for wealthy Europeans escaping lockdowns and others attracted by easy access to COVID-19 vaccinations. The Middle East's business and tourism hub offered additional allure after a property downturn that began nearly seven years ago reduced values by more than one-third.
The housing market is also experiencing a global boom, with valuations rising at the fastest pace since 2006, according to Knight Frank, and annual price increases reaching around 10%. Earlier this year, HSBC Holdings Plc indicated that the increasing demand for larger homes during the pandemic would boost the real estate market in Dubai, echoing the views of analysts at Morgan Stanley who expect the upswing to continue for "several years."
**Declining Supply in 2021**
In Dubai, chronic oversupply kept price increases somewhat in check, but this year saw the lowest number of newly launched homes since 2012. So far this year, 18,616 units have been completed, with an additional 37,466 units scheduled for delivery throughout 2021; this is less than the initially expected 83,000 units, according to CBRE. Khan of CBRE stated over the phone, "At the city level, prices are not expected to rise, and affordability will remain a challenge." He added, "Due to the increase in supply, prices will rise throughout the city, but we will have to wait some time for prices to increase across Dubai."
**Rents Continue to Decline**
House rents continue to decline, falling by 5.9% in the year up to June 2021, highlighting the overall challenges facing the market. Apartments were the biggest hurdle, with average rents down by 8.1% amid ongoing increases in supply. During the same 12-month period, villa rents rose by 10.1%.
