Dubai property in Q1 2023: rates rose twice, buyers kept coming

On 23 March 2023 the UAE central bank lifted its base rate to 4.90%. It had already gone to 4.65% on 2 February. Two rate rises in seven weeks would cool most property markets. Dubai's March was the busiest month of the quarter, with 14,260 home sales.

From January to March we counted 36,570 residential sales worth AED 82.3bn. That's 63.8% more sales than in the first quarter of 2022, and 81.2% more money. Off-plan did most of the growing: more than half the homes sold weren't built yet. The busiest district was Jumeirah Village Circle, where sales more than doubled.

So borrowing got dearer and demand didn't seem to notice. Part of the reason is who was buying. Someone paying a developer in instalments isn't exposed to the base rate the way a mortgage borrower is, and a lot of this quarter's demand was off-plan.

The numbers

The median price was AED 1,332 per sq ft, 9.1% higher than a year earlier. Value grew faster than the number of sales (81.2% against 63.8%), so the typical deal got bigger as well as more frequent.

Our reviews start with this quarter, so it is the first bar on the trend chart, with the quarters that followed greyed out. There is a wrinkle, though. Our median sat 10.1% below the last quarter of 2022, and we don't read that as a price fall. A median follows whatever happened to sell that quarter. Comparing a quarter with the same quarter a year before is the steadier read, and on that basis prices were up.

January and February were close, at 11,291 and 11,019 sales. March pulled well clear.

How we worked it out

We count residential sales of apartments and villas registered with the Dubai Land Department. Land plots, whole buildings and commercial units are left out. That's why our totals are smaller than the government's headline figures, which also include mortgages, gifts and other transaction types. The Dubai Media Office put the quarter at 38,700 transactions worth AED 157bn, across all of those.

Divide AED 82.3bn by 36,570 sales and you get an average of about AED 2.25m a deal. The median deal was AED 1.395m. The average adds up every price and divides, so a handful of expensive villas drags it up. The median is the deal in the middle of the queue, with half the sales cheaper and half dearer, and a few outliers don't move it.

"YoY" means year on year: this quarter against the same quarter twelve months earlier. A median of AED 1,332 per sq ft that is up 9.1% YoY puts Q1 2022 at about AED 1,220.

What sold, and where

Off-plan was 56.7% of sales, 7.8 percentage points more than a year earlier. New and finished homes were priced far apart. Off-plan sold at a median AED 1,549 per sq ft and ready homes at AED 1,094, a gap of AED 455, or about 42%. Some of that gap is location: new stock tends to go up in dearer places.

Cheaper homes did most of the volume. 38% of deals were under AED 1m. Only 2% were above AED 10m.

One-bedroom flats were 41.9% of apartment sales and studios another 21.1%, so about six apartments in ten were a studio or a one-bed. Those are small units that rent out without much trouble. That's investor stock.

Jumeirah Village Circle led with 4,186 sales, up 145.1% on a year earlier, at a median of AED 1,086 per sq ft. Business Bay and Dubai Marina came next. The number that made us look twice was Al Yelayiss 2: 1,282 sales, up 467.3%, with 87.6% of them off-plan. Dubai Creek Harbour wasn't far behind on the off-plan measure, at 82.1%.

What we noticed

• Rate rises didn't dent volume. The base rate went from 4.40% to 4.90% over the quarter. February was a little quieter than January (11,019 sales against 11,291), and then March jumped to 14,260, in the same month as the second rise.
• Villas sold at a lower price per sq ft than apartments: AED 1,018 against AED 1,412. Bigger homes usually do, which is why a villa's per-sq-ft figure can't be set against a flat's. Against Q1 2022, the villa median rose 24% while the apartment median rose about 1%. Early in the year, villas were doing the price growth.
• The off-plan premium is a price on paper. Paying 42% more than ready stock means paying today for a building that won't exist for years. Whether the gap survives handover depends on what else completes nearby.
• Rents were still climbing fast. We counted 177,608 Ejari contracts at a median annual rent of AED 56,000, up 12% on a year earlier, and 54.8% of them were renewals.
• New buyers kept arriving. The Dubai Media Office reported 13,338 new investors in the quarter, up 12%. The D33 economic agenda, launched on 4 January, set a goal of doubling Dubai's economy within a decade.

For developers

• Price against what the area has actually recorded, not against last year's brochure. JVC's median was AED 1,086 per sq ft. A launch well above that needs a reason a buyer can see.
• Studios and one-beds were 63% of apartment sales. A unit mix heavy on three-beds was selling into a much thinner market.
• With rates rising, a payment plan that runs to handover probably does more for sales than a lower list price would. Off-plan in Dubai sells off a published price list, so the market adjusts through how fast units go, not through discounts.
• Al Yelayiss 2 grew from a small base. Fast growth from low volume can reverse fast too, especially if several launches land in the same quarter.

For investors

• Compare your entry price per sq ft with the area's median, and compare like with like: off-plan with off-plan, ready with ready. Mix them and you hide a 42% gap.
• There is rent evidence. A median of AED 56,000 across 177,608 contracts is a citywide anchor, but look at the building's own contracts before you trust a projected rent.
• Off-plan ties up money for years with no rent coming in. A ready home costs less per sq ft and earns from the day the tenant moves in, though the service charges start on day one too.
• Budget for the full 4% transfer fee. In practice the buyer pays it.

The next review is Q2 2023. For current figures, see /analytics.