Dubai leads price growth in global prime residential market with gains of 11.2% in 2023

New report forecasts emirate to continue rally in second half of the year with growth between 6-7.9%

Dubai led the price growth in the global prime residential market, recording gains of 11.2% in the first half of 2023.

According to findings of the Prime Residential World Cities Index, released by real estate services provider Savills, the emirate emerged as the leader in average capital values during H1 2023 across 30 cities, ahead of Mumbai, Cape Town and Bangkok.

The forecast for the second half of 2023 also places the emirate on top of the leader board for growth, with between 6-7.9% expected.

“Dubai continues to perform exceptionally well in H1 2023 and is poised for growth for the rest of the year – a total of 1,500 units priced above AED 4,000 per sq.ft. were transacted across the city, a growth of 67% compared to H1 2023,” said Swapnil Pillai, associate director, Middle East Research at Savills.

According to the findings, the average capital values during the first half of 2023 in the 30 cities tracked grew by an average of 1.1% while in the second half of 2022, 0.8% growth was recorded.

Annual growth of 1.9% to June 2023 was the slowest since December 2020. Meanwhile, average prime residential rents grew by 2.6%, outperforming capital values.

“The slowdown in sales markets recorded in the second half of last year has continued into 2023 in the face of rising interest rates and muted global economic growth.

Despite this, prime residential price growth has, on average, remained positive, and we forecast capital value growth of 1.1% for the second half of the year,” Paul Tostevin, director, Savills World Research, said.

Limited availability of prime inventory was also a factor, and this scarcity is expected to continue, Savills said.

Rising construction costs, development challenges, and increasing debt costs contribute to the limited availability of prime inventory and the upward pressure on rental prices.

Dubai was fourth on the list of rental growth for H1 2023, with gains of 5.4%, with average prime rents in Dubai have witnessed a significant increase of 62% since December 2020.

Lisbon, Singapore, and Berlin led prime residential market rental growth.

The average gross prime yield across the 30 markets held steady at approximately 3% for the first half of the year, with Dubai, Los Angeles, and New York remaining the highest yielding cities at just below 5%.

“Despite the slowdown in sales markets recorded in the second half of last year, we expect rents to continue to outperform capital values for the remainder of 2023 and in the medium-term, as supply continues to remain scarce in the face of growing demand”, Tostevin added.

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