Small in size, high in price: Why property buyers in Dubai are shifting their hunt to outlying areas – News


Published: Thu May 16, 2024, 5:33 p.m

Last update: Thu May 16, 2024, 7:06 p.m

New property units in Dubai are about 12.5 percent smaller than older ones, although prices have risen significantly in the post-pandemic period. This has prompted many property buyers and investors to move to affordable areas and peripheral areas to purchase larger properties at lower prices, analysts said.

Zhann Jochinke, director of market intelligence and research at Cavendish Maxwell, said the launch of new housing projects differed significantly in quality and overall offering from some of the aging existing projects.

“Interestingly, at the bedroom level, the highest price-per-square-foot premiums are predominantly observed in one-bedroom units. These units also have the largest differences in average unit square footage, with new units being about 12.5 percent smaller than older ones. However, despite this size reduction, the sales prices only show a slight increase in comparison,” said Jochinke.

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According to analysts at Property Monitor, off-plan markups exceeded 20 percent, reaching up to 80 percent in Dubai Sports City and 70 percent in International City.

The demand for larger units increased significantly after the coronavirus pandemic as residents could only be accommodated indoors due to the authorities' safety and precautionary measures during the pandemic. But unprecedented demand for property in Dubai in the post-pandemic growth of the real estate market has pushed prices and rents to record highs.

Moving to affordable, larger properties

The unprecedented demand for real estate has also caused land prices to rise significantly, prompting some developers to reduce the size of apartments to accommodate more units in their projects.

As sales prices skyrocket in established communities in Dubai, people are increasingly opting for cheaper areas where they can find similar or even larger properties at lower prices, according to Espace Real Estate analysts.

They continued that rising rental prices and more accessible mortgage products are pushing many residents to purchase a home.

In April 2024, property prices continued to rise to all-time highs, reaching Dh1,351 per square foot, which is 72.1 per cent higher than April 2009 and 9.5 per cent above the market peak of September 2014, according to Cavendish Maxwell's Property Monitor report.

Year-on-year prices increased 20.1 percent in April, now marking the 38th consecutive month of year-on-year increases, while prices have increased 5.23 percent year to date in April 2024 compared to 2.67 percent in April 2023.

Divergence between ready and not on plan

For the future, Zhann Jochinke assumes that the divergence between market segments that are ready and not yet on track will remain.

“On the one hand, the manufactured housing market is largely stagnant across most property types and price points, with the exception of the renovation effect in the single-family home segment. This is particularly evident in the villa segment, where a number of properties have been snapped up as the market recovered and have since been completely renovated,” he said.

With regard to off-plan properties, he predicted that the market would maintain its dominant position in the foreseeable future and project launches would progress quickly.

“While recent off-plan launches have seen strong demand, continued monitoring of absorption rates is essential. A slowdown in absorption could indicate a potential oversupply issue that could lead to a market slowdown,” he added.

Although Jochinke is optimistic about the outlook for the coming year and predicts sustainable growth, he noted that it is crucial for decision-makers among developers, investors and users to remain aware of the lessons from previous market fluctuations.