According to Knight Frank, the Dubai property market has shrugged off the prospect of inflation, with AED 61.9 billion ($16.85 billion) in apartment and villa transactions so far in 2022.
Because of a number of factors, including the government’s diversified import strategy, steps to boost food security, and the strength of the US dollar, the property consultancy believes global inflation spikes will have a limited impact on the UAE economy and Dubai’s residential market for the time being.
“By far the most effective measure is the government’s pre-emptive stealth move to freeze the price for 11,000 basic goods, including milk, bread, meat, and poultry,” said Faisal Durrani, partner, head of Middle East Research.
“The policy has been bolstered by the surge in crude oil prices, which is going to underpin a sharp turnaround in economic growth.”
According to Oxford Economics statistics, Abu Dhabi’s GDP growth will return from 0.5 percent to just over six percent in 2022, while Dubai’s GDP will grow by a similar amount.
It also highlighted the UAE’s purchasing manager’s index (PMI )’s a significant increase.
In terms of interest rate hikes and their impact on buyers who use mortgages to finance their purchases, Knight Frank reports that mortgaged buyers account for just 18 percent of Dubai’s residential market value at the moment, down from 40% last year and just over 50% in 2007.
Ashley Bayliss, partner, head of the mortgage and debt advisory, said: “While this appears to be a decrease in residential mortgage lending, as at the end of May, there has been almost AED 38 billion of financing extended across all real estate asset classes,” he said.
“Extrapolating the number of transactions, we have seen so far this year, 2022 could be on course to see the second-highest level of mortgaged deals in the last five years for the whole real estate market. The main challenge is for banks to keep pace with the current growth of the market.”
Due to the “unrelenting influx” of ultra-high net worth capital targeting Dubai’s most costly residences, Knight Frank stated the highest price transactions tended to be cash transactions.
According to Durrani, property prices in Dubai are likely to rise by 5-7 percent in the mainstream market and 12-15 percent in the elite areas this year.