With Dubai’s property market thriving in 2024, is it an opportune time for investors to purchase villas in the city’s highly desirable residential sector?
The Dubai real estate market has been on a steady rise, showing no signs of deceleration.
Dubai’s property market reached AED 346 billion in transactions during the first half of 2024, representing a 23 percent increase from 2023. This included 100,520 deals and the entry of 50,000 new investors, according to recent data shared by the Dubai Media Office (DMO) on X (formerly Twitter).
As the strong performance of Dubai’s real estate market continues in 2024, potential investors are increasingly questioning: Is it the right time to invest in villas? Here’s what experts had to say:
Dubai real estate market is currently seeing ‘strong investor activity’
“We are still observing robust market performance as we enter the second half of 2024,” stated Lewis Allsopp, Chairman of Allsopp & Allsopp Group.
“Buyers have seen significant returns over the past three years, with the trend continuing as the average price per square foot for villa sales has risen 22 percent year-on-year. Additionally, the sales transaction volume has increased by 80 percent in the same timeframe, demonstrating strong demand from both investors and buyers. I strongly believe that Dubai still offers excellent value for real estate returns compared to other global cities,” Allsopp continued.
The market is currently experiencing “strong investor activity,” with off-plan sales tripling compared to the same period last year. This substantial rise in both prices and transaction volume indicates a healthy market for villas.
Charlie Bannan, Managing Director of haus & haus Real Estate, mentioned that investors looking to buy villas “can expect a net return of 5-8 percent on investment.”
A key factor driving the villa market is the current supply-demand imbalance. “Recent industry data suggests that if every developed property were handed over today, only about 15 percent of the completed properties would be villas and townhouses,” Bannan said, noting that this scarcity is likely to sustain villa prices in the medium term.
Additionally, the luxury segment of the villa market is particularly strong. Allsopp reports that 196 properties sold for over $10 million in the first half of the year, highlighting significant demand at the high end of the market. This trend is further evidenced by recent record-breaking sales, such as an AED105 million villa in Tilal Al Ghaf, managed by Allsopp & Allsopp’s Private Office team.
Should investors buy villas or wait?
Both experts emphasized the importance of careful consideration before investing.
“Before buying a property, buyers should thoroughly assess their financial situation, including evaluating their overall budget and determining the maximum amount they can afford to spend,” said Allsopp.
Bannan concurred, noting, “They should factor in the sale price along with approximately 6-7 percent in fees. Additionally, if they are using a mortgage, there will be a 0.25 percent fee on the loan amount payable to the Dubai Land Department (DLD).”
“One of the advantages of purchasing property in Dubai is the ease of the process – most steps can be done digitally if you’re overseas. While being present for the transfer process is required, obtaining a power of attorney for someone to act on your behalf is also straightforward. Compared to most major cities globally, the process here is quite simple,” he explained.
Prime areas for villa investments in Dubai
For those considering investing in villas, location is a key consideration.
“Communities like Tilal Al Ghaf, Town Square, and Villanova exemplify the expansion of Dubai’s city boundaries. Just over three years ago, these areas were viewed as being ‘far outside’ the city’s established residential zones. However, they have since become highly sought-after locations, with demand and sales/rental prices rising significantly,” Allsopp noted, emphasizing the growth in these regions.
Dubai Hills Estate has proven to be a profitable venture for many, with successful initial purchases and resales, according to Bannan.
He mentioned, “The most exciting new comparable location is Tilal Al Ghaf, currently in the process of handover for various sub-communities, with the master community taking shape. Investing in a master community has been lucrative for many, as seen with Emirates Living (Springs, Lakes, Meadows), Arabian Ranches, and Jumeirah Golf Estates, among others.”
Experts also highlighted government initiatives as significant factors driving future villa demand.
Bannan believes that instead of predicting a market downturn, it’s more practical to consider why it would occur.
He stated, “The Dubai government is doing a lot to attract people to live and work here, such as implementing the Dubai 2040 Urban Master Plan. This plan aims to enhance quality of life through more green spaces and better infrastructure, along with offering long-term visas like the Golden Visa to draw skilled professionals, investors, and entrepreneurs.”
Allsopp added that the Dubai 2040 Urban Master Plan, which includes initiatives like a sustainable corridor along the major highway and multiple metro line expansions, is expected to further enhance the attractiveness of villa communities.
Rental yields are another important consideration for villa investors
For those contemplating whether to invest now or wait, both experts recommend taking action sooner rather than later.
“It might be a cliché, but the key isn’t about timing the market; it’s about the time spent in the market. If you’re considering a short-term investment, it’s crucial to thoroughly analyze the data and seek expert advice. However, most people are purchasing a family home or viewing property as a long-term investment,” Bannan explained.
“Villa rental yields average around 5.23 percent, with a year-on-year increase of 1.16 percent. The top communities based on year-on-year rental yields include Dubai Investments Park (11 percent), Meydan (11 percent), and Motor City (8 percent),” Allsopp noted. He added that investors who bought properties three or more years ago often enjoy better yields today, with some areas seeing increases exceeding 10 percent due to overall rent and price growth.
Allsopp identified three main types of potential villa buyers:
1. End users (homeowners): There’s a notable rise in first-time buyers and tenants seeking to escape rising rents in Dubai. Owning a home can lead to significant savings compared to renting for those who can enter the property market. Our mortgage teams are available to help end users understand the financial aspects of purchasing a home, and our sales agents are ready to assist first-time buyers in finding their ideal property.
2. Property Investors: With rental rates soaring across the city, landlords are enjoying excellent rental yields. Investors looking for short-term returns through rental income and the potential for capital growth find the ready/secondary market an appealing option.
3. Long-term investors (property speculators): Dubai remains a top choice for both local and international investors who are willing to invest now with the expectation of significant capital appreciation in the future. Off-plan investments are particularly attractive, as shown by the strong demand for new project launches in the first half of 2024.
Looking ahead, experts remain optimistic about the villa market’s future.
Bannan highlighted that population growth will have the most significant impact, with more families relocating to Dubai and settling long-term, which will positively influence prices.
Allsopp added that Dubai’s thriving tourism sector, with 9.3 million visitors in the first half of the year, further supports the market’s positive outlook. He concluded, “Ultimately, your decision to buy now will depend on your real estate goals, risk tolerance, and desired return timeframe.”
