Dubai apartment prices skyrocket most in a decade as home ownership widens

Dubai apartment values surged by the most in nearly a decade in August, broadening a property rally that’s transformed the city into one of the world’s hottest housing markets.

The city’s housing boom, so far largely driven by larger single-family homes, is now pushing up prices for apartments that make up about 85 percent of the housing supply in the Middle East’s business and tourism hub.

Prices for apartments rose 20 percent on average in the year through August, marking the best performance since November 2014, according to real estate adviser CBRE Group Inc. The gains outpaced price increases of 17.3 percent for single family homes, known locally as villas, according to CBRE.

Dubai’s real estate rebound comes after a seven-year slump, fueled by an influx of newcomers — from crypto millionaires and bankers relocating from Asia to wealthy Russians seeking to shield assets. The government has also brought in a slew of reforms, relaxing visa laws and introducing visas for job seekers and freelancers.

While prices for single-family homes soared from pandemic lows, the recovery for apartments had so far been slower. Average prices for apartments are still 9.6 percent below their peak in 2014, while those for larger houses are 8.7 percent higher, according to CBRE.

Property valuation and research firm, ValuStrat, which says its data is based on a fixed basket of market representative properties, said apartment prices rose at 10 percent on average in the year to August.

The biggest annual gains were on the man-made island of Palm Jumeirah, where prices surged by a fifth.

“As affordability gets constrained, demand for apartments is surging because they tend to be cheaper in general,” Taimur Khan, CBRE’s head of research, said in an interview. “Also, rental yields in Dubai are considerably higher than what investors can get in London, New York, or Hong Kong.”

The yield for apartments in Dubai — where the currency is pegged to the US dollar and rental income is not taxed — stands at 7.34 percent according to CBRE. By comparison, the average yield in London is 4.18 percent, and in prime central London — where the overwhelming majority live in apartments — it’s even lower at 3.6 percent.

The average annual rent for apartments in Dubai is Dh.106,674 dirhams ($29,000) andDh. 322,573 for villas, according to CBRE.

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