According to global property consultancy, Knight Frank, global HNWI have US$ 2.5 billion to spend on Dubai real estate this year. Last year, US$ 3.8 billion was spent on homes priced at over US$ 10 million in the emirate.

Knight Frank’s inaugural Destination Dubai report surveyed 183 HNWI globally, each with a net worth of over US$ 3 million, excluding their main home, or primary residence. Together, this group own 851 homes around the world and have a combined net worth of US$ 3.2bn.

The world’s wealthy have been increasingly targeting Dubai’s luxurious homes, primarily situated in the city’s most desirable districts. The report highlights Downtown (37%) and Palm Jumeirah (30%) as top favourites among survey respondents. Specifically, for UK/European and North American high net worth individuals (HNWI), the Palm Jumeirah (15%) and Emirates Hills (16%) emerge as preferred locations for residential purchases. For East Asian investors, Downtown is a definite favourite at 53%, followed by Business Bay (32%).

Faisal Durrani, Partner – Head of Middle East Research explained: “Dubai has reached a tipping point and instead of jostling for recognition, the city is going toe to toe with the world’s long-established hubs as a magnet for the world’s wealthy. Outstanding transport infrastructure, unrivalled global connectivity and an exceptionally forward-thinking leadership has catapulted Dubai’s reputation and status globally, as evidenced by the unrelenting demand from international high net worth individuals to own second homes here, or indeed relocate to the emirate.”

New Builds Vs Secondary Market

The report also highlights the shift in preference from off-plan purchases to recently built/completed homes. 53% of HNWI buyers are focusing on acquiring newly constructed homes, rising to 71% amongst HNWI from East Asia.

Faisal Durrani, Partner – Head of Middle East Research continued: “With a history of just 23 years, identifying signs of maturity in Dubai’s residential market is challenging. That said, with the surge in second home purchases, particularly in locations such as Palm Jumeirah, the global elite are paying record prices to secure beachfront villas. They are subsequently spending almost the same amount again on customising these homes, suggesting they will be removed from the natural cycling of homes on the market for a period, mirroring what we see in established markets such as London. Indeed, 71% of our respondents with a net worth of over US$ 10 million intend to refurbish or renovate their Dubai residential purchase.”

Rising Global Stature as a Luxury Residential Hub

Dubai emerged as the world’s 4th most active market for luxury home sales during 2022, trailing just behind New York, Los Angeles, and London. The city recorded 88 home sales over US$ 10 million in Q1, cumulatively exceeding AED 6 billion. High demand from local and international UHNWIs led to a 16% increase in average transaction prices for these luxury homes. Prominent neighbourhoods like the Palm Jumeirah, Emirates Hills, and Jumeirah Bay Island continue to lead the charge.

Emerging Prime Residential Neighbourhoods

Significant local and international UHNWI demand has boosted the prices of premium homes. In Q1, average prices for homes above US$10 million reached AED 7,235 per square foot, a 16% surge from 2022’s AED 6,250 psf. Prime residential areas like Palm Jumeirah, Emirates Hills, and Jumeirah Bay Island continue to lead luxury sales, with prices averaging AED 8,800 psf in Q1.

These prime neighbourhoods constituted 64% of Q1 sales for homes above US$10 million, with emerging areas like Al Wasl-Dubai Canal corridor and Tilal Al Ghaf showing potential as future ‘prime’ locales. With several high-value transactions recorded, these areas are gradually positioning themselves as hotspots for UHNWIs in Dubai’s property landscape.

A Global Appetite for Real Estate in Dubai

The city’s successful handling of the COVID-19 pandemic and strategic economic stimulus measures have been recognized as key drivers behind a remarkable 112% growth in prime residential values since January 2020.

The Reign of the Residential Sector

New findings from Destination Dubai report showcases an impressive surge in Dubai’s residential landscape, with the city’s prime neighbourhoods, Palm Jumeirah and Downtown, leading the pack. According to the report, these submarkets recorded exceptional growth rates of 25% and 15% respectively in the last year, since Q1 2022. For villas, the growth has been strikingly uniform with villas on Palm Jumeirah witnessing the most significant price surge at 126% since January 2020.

These remarkable growth rates underscore the tremendous strength and potential of Dubai’s real estate sector, reinforcing the city’s reputation as a global hub for luxury residential property.

Preference for Apartments Over Villas

Interestingly, despite the fame of Dubai’s villa lifestyle, the report found apartments as the more popular residential property type among global HNWI, with 64% favouring them. However, amongst those with a net worth over US$ 10 million, 53% prefer to buy a villa in Dubai.

Decoding Location

In Dubai’s current property cycle, the luxury apartment submarkets, namely Palm Jumeirah and Downtown, have witnessed growth rates of 25% and 15% since Q1 2022, respectively. Conversely, villa prices have risen uniformly, driven by domestic space demand and UHNWI second-home buyers. However, Palm Jumeirah’s villas, experiencing a notable 126% growth since January 2020, lead the city’s price gain trend.

Defining Dubai’s Prime Residential Market

The report takes a unique approach to identifying prime neighbourhoods in Dubai, a city with 5 distinct city centres. Leveraging data from over 600,000 residential transactions in the past 23 years, the report identifies Palm Jumeirah, Emirates Hills and Jumeirah Bay Island as the key prime neighbourhoods, marking an important evolution in Dubai’s real estate sector.

Andrew Cummings, Partner and Head of Prime Residential at Knight Frank says: “The feel-good factor extends beyond sentiment, with economic KPIs pointing to sustained business positivity for over two years. In addition, the constantly changing landscape of Dubai’s real estate, indicates that we are starting to see new submarkets emerge, coupled with the huge demand for luxury homes means that we will be adding new markets to our prime index. Tilal Al Ghaf is a neighbourhood that has quickly joined Dubai’s growing list of ultra-luxe areas. Three homes sold for over AED 90 million last year, and seven villas transacted for over US$ 10 million in Q1 of this year, strongly suggesting that Tilal Al Ghaf will soon meet our definition of a prime neighbourhood.”

Home Acquisition Drivers Vary, Yet Investment Potential Remains High

Diverse motivations drive the acquisition of a home in the city. However, expanding their property portfolio emerged as the primary reason for US$ 10 million+ net worth respondents. Importantly, a significant portion of respondents who have never visited Dubai expressed interest in using their property as a second home or an investment.

An Investment Powerhouse

The report reveals that respondents have earmarked a staggering US$ 2.5bn for property purchases in Dubai this year. Remarkably, 22% of respondents are prepared to commit US$ 5-10 million, while 8% are ready to spend over US$ 80 million.

Shehzad Jamal, Partner – Strategic Consulting (Real Estate | Healthcare | Education) says, “As Dubai’s real estate sector continues to evolve, it is demonstrating characteristics of a mature market. World-class infrastructure, excellent connectivity, and proactive government policies have caught the eyes of investors from Europe, East Asia, and Americas. People from various jurisdictions are looking to relocate to Dubai, driving job and wealth creation rates, contributing further to a stable real estate market.”

Big Spenders

According to our survey a strong demand for second homes and investment properties in Dubai among High Net Worth Individuals (HNWIs). ‘Investment/capital gains’ and ‘second home/holiday home’ purchase emerged as the top motivators for this demographic. Individuals with a net worth over US$10 million primarily aim for ‘portfolio expansion.’

The total budget for Dubai property purchases this year among respondents reaches US$2.5 billion, with a significant portion willing to spend upwards of US$5 million. East Asian buyers display higher spending propensity, with many prepared to allocate over US$20 million.

Infrastructure and Tourism Play a Crucial Role

Dubai’s high-quality transport infrastructure has been identified as the top reason why the emirate is an attractive destination for real estate investment, according to a recent survey of global HNWI. 47% of respondents cited this as the strongest factor.

In addition, Dubai’s emergence as a global tourism hub has made it more accessible to visitors since the launch of Emirates in 1985. The city’s rebound from the pandemic has been impressive, with tourist numbers expected to surpass pre-Covid levels.

During Q1 2023, 4.7 million visitors passed through the city’s gateways. For those who have not yet visited, the top two reasons why Dubai is an attractive place for real estate investment are its status as a global tourist destination (54%) and the absence of taxation (51%).

The Winning Card

A key factor enhancing Dubai’s allure as a destination for property purchase is its ‘wide range of project availability,’ selected by 38% of survey respondents. For those with a net worth over US$ 10 million, and for UK/European HNWI, this feature emerged as the primary attribute influencing their choice, scoring 51% and 38% respectively.

Dubai, typically adding around 30,000-35,000 homes annually, currently has about 94,000 residential units under construction, slated for delivery by the end of 2026. This wide array of housing choices further cements Dubai’s position as an attractive destination for property investment.

The Global Investment Hub

The UAE’s perceived status as a ‘good investment opportunity’ drives 40% of respondents’ interest in the country, with 37% citing its vibrant lifestyle sectors as a key appeal. Despite increasing interest in the wider UAE, Dubai remains the preferred destination, claiming 67% of interest, followed by Abu Dhabi (21%) and Ras Al Khaimah (5%). This demonstrates Dubai’s continued dominance as a lifestyle and investment hotspot.

Dubai’s prime residential market continues to be a global outlier, with record price growth in 2022, albeit from a low base. Dubai’s safe-haven status is fuelling prime values and an exceptionally diverse range of international ultra-high-net-worth individuals searching for luxury second homes, combined, of course, with the government’s world-leading response to the pandemic, is spurring business confidence.