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Dubai has surpassed more established centers as the leading market for prime luxury properties, driven by high demand. In the first quarter of 2023, there were 92 deals worth $1.7 billion for homes priced at $10 million and above, making Dubai the busiest market globally, according to Knight Frank real estate consultancy. By comparison, Hong Kong had 67 transactions valued at $988 million, New York had 58 deals raising $942 million, and London recorded 36 sales worth $736 million. The world’s wealthiest individuals are investing in Dubai’s luxury homes market as a financial haven, resulting in a seventeen-fold increase in sales of $10 million and above homes over the past five years. In 2022, London had the most $10 million and above home sales with 246 transactions raising $4.7 billion, while Dubai recorded 224 deals generating $3.9 billion.
The sanctions imposed on Russia and its businesspeople following the Ukraine invasion have further accelerated the influx of wealthy residents to Dubai from Russia and other countries. The United Arab Emirates, remaining neutral in the conflict and maintaining close ties with both the US and Russia, has welcomed non-sanctioned Russians. The Russian population in the UAE has presumably increased fivefold to around 500,000 since the invasion. The demand from Russians for luxury properties in Dubai, particularly in the ultra-luxury segment, is still strong. Many are relocating from countries like Switzerland and the UK, purchasing full-floor penthouses with double high ceilings and water views.
The value of $10 million and above property sales in Dubai rose to $3.1 billion in the first half of 2023, exceeding the total sales of $3.9 billion in 2022. Knight Frank reports a 44% increase in the value of prime residential real estate in Dubai last year, with an additional 11% rise in the first half of this year. Despite concerns of potential market downturns like those experienced in 2009 and 2014, Faisal Durrani, Head of Middle East Research at Knight Frank, does not believe there is any evidence suggesting a similar decline is imminent based on the available data and economic trajectory.
The boom in luxury homes has had a ripple effect on the wider property market in Dubai, resulting in a 15% increase in apartment prices and a 46% increase in villa prices at the end of June compared to the previous year, according to Knight Frank. This has led to higher housing and rental costs for less-wealthy residents as more professionals and blue-collar workers move to Dubai due to its thriving business activity in contrast to economic slowdowns elsewhere. The rising costs of food and education, in addition to housing, now pose a threat to Dubai’s competitive advantage in attracting expatriate labor. While there is still a strong desire for professionals to relocate to Dubai, the higher costs are putting pressure on mid- and lower-income households, as noted by Monica Malik, Chief Economist of Abu Dhabi Commercial Bank.
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