Dubai is waiting grow up for the off-plan market and rent to stabilize
Experts have begun to make more concrete predictions about how the Dubai real estate market will change in the remaining six months of 2023. Now, to the general forecasts that the market is almost certain to grow, a host of additional assumptions backed by statistics have been added.
CONTENT:
Where to expect new housing?
Rent Regulation
Different Index Calculation
Off-plan success – depends on the developer
WHERE TO EXPECT NEW HOUSING? Analysts have calculated that by the end of 2023, another 35,000 apartments and 6,800 villas will be handed over in Dubai. New real estate will appear in all areas of the emirate, but the following can be especially highlighted:
Downtown Dubai – a popular area with elite real estate; Business Bay – an area with a large selection of apartments in high-rise buildings; Jumeirah Village – a residential complex consisting of six areas with a wide selection of various real estate. Experts separately highlight three areas of the emirate under construction, where a lot of new real estate will appear by the end of the year.
Mohammed Bin Rashid City (MBR City) – a developing freehold community in Dubai, one of the largest new areas; Dubai South – an area with the largest international airport Al-Maktoum; Dubai Creek Harbor – a large high-rise residential complex in the coastal zone. The biggest growth in 2023 will be in Mohammed Bin Rashid City – developers plan to hand over a total of 10,000 apartments there.
RENT REGULATION The first half of 2023 marked an increase in rental yield. And if this was good news for investors, then not always for tenants. Therefore, the Dubai authorities will try to regulate the growth of rent.
Now, to calculate the growth of rent, the Dubai Land Department (DLD) uses the so-called rental index. It determines how much the rent can increase, depending on the location of the property.
DIFFERENT INDEX CALCULATION The new rental index will be calculated in a completely different way. It will take into account how people assess the quality of life and the convenience of infrastructure in a particular building. The final rating will be made up of these assessments, expressed in “stars”. For example, a building with the highest possible rating of 4 stars will be considered “ultra luxury”. In such buildings, landlords will have no restrictions on the growth of rent.
However, more modest buildings will have restrictions. To increase the rent in a building that is not popular with people, the owner will have to obtain permission from the Real Estate Regulatory Authority (RERA).
Initially, this innovation will only affect apartment buildings, but later it will be applied to villas as well. As for how all this will affect the rental yield, the general forecast is that while the rent will continue to grow in the second half of 2023, its growth rate will significantly decrease.
OFF-PLAN SUCCESS – DEPENDS ON THE DEVELOPER A noticeable trend in the first half of 2023 was the growing popularity of off-plan real estate. For example, in May there were 4,824 transactions with apartments and 1,137 off-plan transactions with villas. This is 103% and 30% more, respectively, than in May 2022.
For comparison, in the same May 2023, there were 4,038 transactions with ready-to-move-in apartments and 877 transactions with ready villas (74% and 57% more than the figures for May 2022).
Many believe that the off-plan real estate market awaits further impressive growth and dominance over ready-made projects. However, there is an opinion that such success will be short-lived and the new trend will die down by the end of the year. For now, given the popularity of off-plan projects, We advise investors to be very careful in choosing developers in whose projects they plan to invest.