How has the Dubai real estate market responded to all the innovations in 2023? Analysis and trends of the Dubai real estate market in the past year

The Dubai real estate market has been growing for many years. This is due, among other things, to an increase in population, the development of the rental market, innovative projects, a high standard of living and the absence of taxes. Recent government initiatives have created an even more welcoming climate in a multicultural environment. How the Emirate's real estate market responded to such a strategy, read in REALTING's analysis.

About the 2023 record, taxes, marriage and alcohol

As expected, 2023 was a record year for the Dubai real estate market as more than 104 thousand sales transactions were completed with residential real estate, which is 1.5 times more than in 2022. Cash turnover from the sale of housing in the past year amounted to $59,694 million. The most active period of 2023 can be called the 3rd quarter — from July to September, 29 thousand transactions were registered in Dubai.

Dubai remains one of the most attractive locations for tourists, investors, and expats. And the government of the country in 2023 actively introduced legislative changes that had a positive impact both on the situation within the emirate and on the international attractiveness of Dubai.

In 2023, there were 2 important changes related to the organization of the work process.

First, in order to reduce costs, the two-year valid work permit was “automatically” extended to three years.

The second is the introduction of a mandatory social protection scheme for workers ILOE (Involuntary Loss of Employment) — insurance against involuntary loss of employment. The scheme aims to pay a dismissed employee compensation of up to 60% of his average salary for the last six months for a maximum of three months in the event of job loss (provided that the dismissal is not related to disciplinary offenses or violations on the part of the employee). The cost of such insurance depends on the monthly salary: 60 AED/year ($16) for those who receive 16 thousand AED ($4360) and less, or 120 AED/year ($32) for those who receive more than 16 thousand AED.

Also in Dubai, from January 2023, alcohol became cheaper and more accessible as the government abolished the 30% tax on the sale of alcohol for a year, and Dubai residents could obtain an alcohol license for free, just like tourists.

It is important to note changes in the procedure for registering relationships: from the beginning of 2023, a law regulating family relations came into force, which assumes equality between men and women, simplifies the procedure for concluding and dissolving a marriage between non-Muslim foreigners, and also regulates issues related to the inheritance of property of spouses in the absence of wills. Now, persons over 21 years of age can get married in the UAE by mutual consent, and get a divorce without giving reasons.

Tax legislation, on the contrary, has become stricter. In June 2023, Dubai introduced a 9% corporate tax on income exceeding AED 375 thousand. The tax applies to all businesses and persons with trade licenses operating in the Dubai domestic market, except for those located in free trade zones.

Such an innovation is likely to lead to an increase in the cost of owning and operating real estate, as a result of which investors will decide to reorient investments in order to minimize the tax burden. And since free economic zones remain outside the tax zone, they can become even more attractive for business and investment.

A typical purchase in 2023 is an off-plan apartment with your own funds

Apartments in Dubai still remain the most popular housing option, their share in the total number of transactions increased to 84% (+3 percentage points).

Minimal changes have occurred in buyer preferences and when choosing the stage of project readiness: 58% of transactions in 2023 were made with off-plan residential real estate. The share of housing transactions under construction increased by 4 percentage points over the year.

It is worth saying that in 2023, RERA tightened control over developers. The purpose of such changes is to ensure the timely commissioning of facilities of appropriate quality.

Developers are now required to provide up-to-date information on project progress and maintain open communication with buyers throughout the construction process. The developer is also obliged to correct any defects or problems. The defect liability period is usually specified in the purchase agreement and can range from one year for minor problems to ten years for design defects.

Another reason why off-plan housing is a safe investment in Dubai is the account that developers are required to open and maintain for each project to store the funds invested. The developer can withdraw funds only in accordance with the stages of construction of the project, confirmed by the engineer.

There were no changes in the structure by type of financing over the year: 86% of transactions are still carried out using own funds, the remaining 14% using a mortgage.

Apartments are stable, but villas are “growing”

The most significant changes in the average price per sq. m occurred in the segment of existing apartments: the average price of a meter increased by 9% and settled at $3,630/sq.m, while for off-plan apartments the price for 12 months changed only by 1% despite fluctuations during of the year.

The price gap between the secondary market and off-plan still remains significant: apartments on the secondary market will cost 37% less than properties under construction.

Average price per sq. m has especially grown in the villa segment: a property that has not yet been put into operation can be purchased on average for $3,800/sq.m — growth over the year was 30%. An already completed villa will cost on average 30% cheaper — the cost of a meter at the end of 2023 was $2,660/sq. m.

Increased interest in modern, technologically equipped houses, which are offered in off-plan projects, as well as the status of a “world center” determined the need for legislative changes in the emirate. The outcome for 2023 in Dubai is an even more transparent and regulated real estate industry, ensuring the protection of all parties involved in transactions, as well as an environment that meets international standards and expectations.