Dubai property in Q3 2023: the summer off-plan took over

By six in the morning on Wednesday 20 September, buyers were already queuing outside Nakheel's sales centre for the first Palm Jebel Ali villas, Gulf Today reported. Prices started at AED 18.5m. The first release sold out within hours.

That queue got the headlines. Most of the quarter's buying happened much further down the price range. Dubai registered 42,693 home sales between July and September, 16.1% more than in the spring, and 61.1% of them were off-plan. It's the first quarter in our series where off-plan took six sales in ten.

Summer is usually when Dubai slows down. In 2023 it didn't. July was a little quieter than June, then sales rose in August and peaked at 15,877 in September, the busiest month of the year in our figures. The central bank made its last rate rise of the cycle on 27 July, to 5.40%, and buyers kept signing.

The numbers

The median price reached AED 1,450 per sq ft, up 4.2% on the quarter and 15.4% on a year earlier. Sales were worth AED 97.6bn, 61.1% more than in Q3 2022.

Three quarters in, the trend line had climbed from AED 1,332 to AED 1,450. That's about AED 59 a quarter, and it rose by much the same amount each time.

How we worked it out

We count residential sales of apartments and villas registered with the Dubai Land Department. Land, whole buildings and commercial units are excluded.

AED 97.6bn across 42,693 sales is an average of about AED 2.29m a deal. The median deal was AED 1.43m. The two differ because an average adds every price and divides by the number of deals, so a few expensive villas lift it. The median is the deal in the middle of the line, with half the sales below it and half above.

For the growth figures: 42,693 against 36,771 in Q2 is 5,922 more sales, or +16.1%. Price per sq ft went from AED 1,391 to AED 1,450, which is AED 59 more, or +4.2%. "YoY" (year on year) compares with July to September 2022. A 15.4% rise puts last year's median at about AED 1,256.

Off-plan's share is a count. 61.1% of 42,693 is roughly 26,100 sales. By value it was higher, at 63.6%, because off-plan sold at a median AED 1,722 per sq ft against AED 1,100 for ready homes. That's about 57% more per sq ft for a home that isn't built yet.

What sold, and where

Ready-home prices barely moved all year: AED 1,094 in Q1, AED 1,104 in Q2, AED 1,100 in Q3. Off-plan went from AED 1,549 to AED 1,722 over the same stretch. On our reading, most of the citywide rise came from what was being launched. Finished homes weren't reselling for much more.

Studios reached 22.8% of apartment sales, their highest share of the year, and one-beds were 42%. Small units at entry prices carried the volume.

Al Merkadh, the registry area that takes in Sobha Hartland in MBR City, nearly caught Jumeirah Village Circle: 4,361 sales against JVC's 4,580. Its sales were up 179% on a year earlier, and 86.8% were off-plan. Al Barshaa South Third did the same thing on a smaller scale, with 2,480 sales, 87.5% of them off-plan.

The older centres went the other way. Business Bay was down 10.1% on a year earlier and Downtown Dubai down 19.9%, with only 29.2% of Downtown's sales off-plan. Jumeirah Lake Towers was up 155.8%. Its median of AED 1,930 per sq ft compares with AED 1,284 in Q2, which tells you a different set of buildings sold there this time.

What we noticed

• Demand followed the launches. Al Merkadh, Al Barshaa South Third and Wadi Al Safa 5 sold 8,660 homes between them, most of them off-plan. Where there was little new to buy, as in Downtown, sales fell.
• The rate peak didn't stop anything. Four rises in 2023 had taken the base rate to 5.40% by the end of July, and August and September each beat every month of the first half.
• The top end was busy as well. We counted 236 home sales of AED 36.7m (US$10m) or more in the first nine months of 2023, treating a multi-unit purchase registered on one day as one deal. The biggest of the quarter was AED 420m, at Jumeirah Living Marsa Al Arab in July.
• Rent growth held up. We counted 171,105 Ejari contracts at a median annual rent of AED 62,000, up 11.9% on a year earlier.

For developers

• Off-plan sold at a 57% premium to ready stock this quarter. That premium rests on a promise of a finished building, and late handovers put it at risk faster than anything else.
• Al Merkadh and JVC each sold more than 4,300 homes. In areas that busy, several launches chase the same buyer in the same month. Look at what's already on sale nearby before you set the release size.
• Studios and one-beds were 64.8% of apartment sales. That's where the volume was, but a building of mostly studios depends on one kind of tenant.
• Price lists are fixed, so in a strong quarter the thing to watch is how fast units sell. A release that sells out in days was probably priced below what buyers would have paid.

For investors

• Most of the price rise was in new launches. Ready-home medians stayed at around AED 1,100 per sq ft, so a higher citywide median doesn't mean your existing flat is worth more.
• Off-plan bought at AED 1,722 per sq ft needs the finished building to be worth that at handover. Check what ready homes in the same area sell for today.
• Look at the building's service charges as well as the price. RERA publishes them in its service charge index.
• Rents were rising 11.9% a year, but rents follow supply. The off-plan sold this quarter will be finished homes looking for tenants in a few years.

The quarter before is Q2 2023, and the year closes with Q4 2023.