The next wave: Top Dubai real estate trends forecasted in 2024

Throughout 2023, real estate in the UAE has shown sustained growth and newer consumer preferences, welcoming increased foreign confidence and igniting great opportunities for transformation.

As we approach 2024, there are several factors actively contributing to the sustenance of this growth. Property Finder, UAE’s leading real estate marketplace gathered insights from top players in the market at their recently held annual recognition meet.

Mid-market stabilisation

Ever since the COVID rebound of late 2020, the market has displayed a more sustained pattern of growth, indicating a maturing phase rather than a speculative boom. 2024 is going to be an interesting year for real estate in Dubai.

The majority of properties set for completion in 2024 are in affordable areas such as Jumeirah Village Circle, Arjan, Dubai Production City (IMPZ), and Dubai Land. Mid-market areas such MBR City, Dubai Hills, Dubai Marina, and Business Bay are set to see properties handed over as well.

This will most likely add pressure to rental prices in affordable areas and somewhat stabilise the mid-market as rents become less sticky. Although, in the upper segment of the market, with supply still not meeting the demand equilibrium, rents may stick and prices swing upwards.

AI integration and digital transformation

Traditionally, personal relationships have already been of great importance within the real estate business. However, it is impossible to ignore the ever-growing influence of tech integration paired with artificial intelligence.

Real estate in 2024 will be defined by the seamless integration of technology and AI, reshaping the way we engage with real estate, while fostering greater trust and transparency in the industry.

Features such as virtual tours, 3D floor plans, AI-powered property furnishing, the ability to virtually add a pool to a 3D floor plan, and AI-driven market analysis are offering clients the unprecedented ability to visualise both ready properties and off-plan developments. This trend is closely intertwined with the drive towards greater transparency and clarity in property transactions.

Giving clients access to comprehensive and reliable information, and technology is further bolstering confidence within the real estate market. For example, Data Guru by Property Finder was launched this year to empower consumers with a wide range of tools and features that make property search much simpler today than ever before.

By providing comprehensive pricing insights, historical transactions, neighbourhood trends, community details and a rent versus buy calculator, the feature adds to a host of other tools including SuperAgent, virtual viewings and verified listings. This has helped address the growing need to fill in knowledge gaps for consumers by giving them all the tools they need for more informed property decisions.

Further opening up a greater role for proptech portals in 2024 that largely entails enhancing while also creating new dimensions for trust and transparency within the sector. Looking back at 2023, the best way to do so would be by unlocking seamless user experiences meant for greater convenience at the simple click of a button.

Cap rate compression

In 2024, cap rates are expected to compress as the global investment community realises that the risk profile in Dubai is similar to that of its peers, Therefore, its cap rates should not be far from theirs. Currently, tier-1 cities are capped at 3.35% on average, while Dubai is at around 6%. This means that for Dubai to have the same cap rate, and assuming current rents are in fact sticky, prices would have to go up by a factor of 1.67x to come on par with global peers.

Even if the risk in Dubai’s market is perceived to be higher than those of global peers, it is our conviction that the cap rate gap is too large and not justifiable. Dubai cap rates should adjust downwards, which means there is more room for asset price growth over the year 2024, leading to greater returns on investments.

Increased diversification

More than ever before, the UAE real estate sector currently is in a unique position driven by widespread economic diversification, recent initiatives boosting the growth of foreign investments, new residence and visa policies.

Notably, 2023 saw a surge in off-plan projects, with diverse offerings from different developers. This influx of innovative properties has laid a strong foundation for what lies ahead in 2024.

Many of the off-plan projects initiated in previous years will reach their handover stages. Consequently, a substantial influx of consumers can be expected to move into their new properties, others seeking to lease these units, and a significant number considering the resale of their off-plan investments. It’s worth noting that off-plan properties tend to yield the best returns when sold after handover.

Developers will also continue to launch new projects at an accelerated rate. This extra supply is likely to keep prices in check. On the other hand, for renters, there may be some relief towards the latter part of 2024 with the delivery of more new homes which will hopefully take some pressure off the current rental market.

Relocation prospects

Dubai’s strategic approach to development positions it as an attractive destination for relocation across various industries. Blueground highlights a significant trend towards flexible living, driven by evolving lifestyles, career changes, and technological advancements.

Flexible living, currently at 2% market share, is projected to reach 20% by 2035. Factors such as technology enabling remote work, the rise of ‘work-cations’ and the impact of the COVID-19 pandemic contribute to this growth.

The moderate growth rate, considering recent trends, is complemented by an increased pace of new build handovers and projects, potentially alleviating supply-side pressures. Navigating 2024, the real estate sector appears poised for continued expansion, supported by a well-thought-out combination of economic incentives and proactive government.