DUBAI, UAE — A plot of land on Dubai’s luxurious Jumeirah Bay Island was recently sold this week for a record US$34 million, making it the most expensive land plot ever sold in the history of the UAE’s real estate market.
According to global property consultancy firm Knight Frank, the 24,500 sq. ft. sandy plot sold for an impressive $34 million, setting a new benchmark and breaking the previous record of $24 million.
Jumeirah Bay Island has not only established itself as the top location in Dubai for Ultra High Net Worth (UHNW) individuals but has also created a submarket accessible exclusively to the ultra-wealthy.
Knight Frank’s recent data shows that luxury home sales in Dubai reached $1.63 billion in the first quarter of 2023, with wealthy buyers purchasing 88 units valued at more than $10 million, indicating a continued increase in prime property sales amid broader economic recovery.
The emirate’s luxury real estate segment has benefited from the global slowdown, with Indian billionaire businessman Mukesh Ambani reportedly paying $163 million for a property on Palm Jumeirah, the city’s artificial tree-shaped island, late last year.
High oil prices have been the primary driver of the city’s robust real estate market. Additionally, Dubai’s low taxes, low crime rates, and the desire of the world’s wealthy to invest their fortunes in real estate have made it a haven during the pandemic and times of conflict.
Russian nationals have been acquiring real estate in a city that still welcomes them, and new “golden” visas for long-term residents are enticing other wealthy individuals to invest in Dubai real estate as well.
Due to overbuilding, the city is now facing a shortage of real estate, particularly luxury properties, according to some brokers.
“When it comes to UHNW individuals purchasing luxury homes in the UAE, they have a specific lifestyle in mind. Most people prefer the sun, sea, and sand lifestyle. The only way to achieve this is by buying a single-family home or a beachfront villa, which is why prices have risen so rapidly in the last two and a half years,” said Faisal Durrani, Partner Head of Middle East Research at Knight Frank, in an interview with TRENDS.
“Villa prices have increased by about 13 percent, but these buyers are looking for high-end beachfront properties in prime locations. As a result, our definition of prime residential real estate in Dubai includes Palm Jumeirah, Jumeirah Bay Island, and Emirates. For example, since the pandemic began two and a half years ago, villa prices on Palm Jumeirah have nearly doubled because these ultra-high net worth buyers, particularly those from abroad, desire a beachfront lifestyle and a completed community, which Palm Jumeirah provides,” Durrani added.
However, one of the most interesting aspects of this cycle, according to Durrani, is that these buyers are purchasing these villas as second homes rather than buying properties to flip, as seen in previous cycles. This is evident from the fact that they pay record prices for these villas and then spend additional amounts on refurbishment, indicating heavy customization for their personal use.
“We’re always on the lookout for signs of market maturity. The Dubai real estate market is only 23 years old, and when these properties are purchased and customized, they are temporarily removed from the market. So, they won’t be available for sale for a while, and we usually see this in very advanced mature markets like London or New York, where UHNW individuals buy a second home and hold onto it for a long time. As a result, there is increased demand because the supply of properties, especially in sought-after areas like Palm Jumeirah, is limited, leading to rising prices.
Laura Adams, Director of Sales at Provident Estate, agrees with this assessment, stating, “HNWI buyers are now seeking more square footage for their money.” These buyers are highly selective about the location and offerings of a property. They also prioritize construction quality, including premium materials, advanced building technologies, and high-end finishes. Adams emphasized the value placed on amenities such as a gym and a swimming pool.
Dubai has become an attractive place to live due to various reasons, including flexibility, safety, favorable weather, prime location, desirable lifestyle, and the availability of branded residences, according to Adams. Investors quickly recognize these benefits and the increasing demand for luxury real estate.
Will McKintosh, Senior Director and Head of Residential & Investment, MENA at JLL, concurs with Adams, stating that Dubai is a safe place to raise a family. He points out that the city is a top tourist destination worldwide, and visitors are consistently impressed by the high standard of living it offers residents. The strong culture of innovation and the central location of Dubai also attract a growing number of ultra-high-net-worth individuals to make it their home.
Wealthy Chinese and European buyers are expected to dominate the market, according to a recent market study by Realiste, a Dubai-based proptech company. The study suggests that the share of international buyers in Dubai’s luxury housing segment will significantly increase in 2023, with Chinese investors leading the way following the lifting of Covid-related restrictions in their country. European investors are also expected to intensify their investments in high-end properties in Dubai due to high inflation rates in their home countries.
In 2022, high-net-worth Russians were the top buyers in Dubai’s high-end real estate sector, largely due to the Russian-Ukrainian crisis. Based on Knight Frank’s data, buyers come from around the world, with mainland China, India, and the United Kingdom being the primary sources. Russians, Emiratis, Iranians, and Canadians round out the top ten. Recently, the market has witnessed an influx of high-end buyers from Switzerland and Monaco, which are new and previously unseen locations in the Dubai market.
Dubai ranks as the world’s fourth-most active market in the luxury residential segment. In 2022, 219 homes priced above $10 million were sold, with a total transaction value of $3.8 billion. This puts Dubai behind New York, Los Angeles, and London in terms of prime property sales.
Palm Jumeirah, Emirates Hills, and Jumeirah Bay Island remain the dominant neighborhoods for luxury home sales. During the first quarter of 2023, the average transacted prices for $10 million homes in these highly sought-after locations reached $2,400 per square foot.
According to the Realiste study, certain desirable residential areas, such as Downtown Dubai and Palm Jumeirah, are expected to see a 7 percent increase in value in 2023. Dubai Marina is projected to see a 6 percent increase, while Jumeirah Bay and Bluewaters are expected to experience a 5 percent and 2 percent increase, respectively.
Among these areas, properties in Bluewaters are currently considered among the most expensive in the emirate, with average prices estimated at $20 million and an average per square foot price of $10,319. On the other hand, upscale properties in Jumeirah Bay and Downtown Dubai are comparatively less expensive, with average prices of $7 million and $3.2 million, respectively.