The fast approaching 2022 World Cup has been heralded as a potential boon for neighboring countries that of Dubai luxury real estate market, but this could be the last rally before an impending downturn, experts say.
Organized for the first time in the Middle East, the football tournament will take place from November 20 to December 18 in Qatar. But with a limited supply of accommodation, many fans will move to nearby cities such as Dubai, which could lead to increased sales of luxury real estate in a white-hot market that already leads the world in terms of rising house prices.
“Due to the nature of the event, it attracts many high net worth individuals,” said Jeff Raju Kuruvilla, sales manager at Positive Properties, a Dubai-based brokerage firm. “I already get a lot of calls from people attending the World Cup asking us for accommodation options, as well as investment options… Once they are released from the World Cup, I show them the new projects that are being launched here in Dubai.
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Around 1.5 million fans are expected to attend the tournament in Qatar. A housing shortage means the fallout is expected to remain in the United Arab Emirates, primarily in Dubai.
Qatar Airways and Flydubai will operate up to 54 approximately one-hour flights a day between Dubai and Qatar, allowing fans to fly in for a match and return the same day.
Even fans planning to stay in Qatar are expected to spend time in other destinations, with the number of visitors planning to spend at least two nights in Qatar and then at least two in another Gulf country, increasing 16 times over to pre-pandemic travel. patterns, according to statistics compiled by travel data firm ForwardKeys.
“Dubai is by far the biggest beneficiary of this trend, capturing 65% of return visits,” the company said in an October report.
“People will come here, stay in hotels or Airbnbs or whatever, go see the games, come back and spend another two or three days, and it will make it easy for them to consider Dubai as a real estate investment,” said Shabna Ibrahim. , an investment consultant at A1 Properties, a Dubai-based brokerage firm.
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World Cup-related tourism is expected to give a huge boost to Dubai’s hotel sector, including its short-term rental market, but brokers also anticipate an impact on luxury residential real estate, which has seen a boom since the start of the pandemic, with prime properties in some neighborhoods nearly doubling in price.
“We expect property sales to increase during the World Cup period,” said Honey Deylami, executive partner at Luxhabitat Sotheby’s International Realty in Dubai. “We have seen historic transactions during periods of intense tourism, which showed us that a reasonable number of visitors to Dubai usually end up investing in real estate after experiencing the luxury, the comfortable lifestyle, the security and safety, as well as tolerance and diversity in the city.”
Mr Kuruwalla said he expects the tournament to give Dubai’s leading real estate sector a similar boost to Expo 2020, a global exhibition that ran from October 2021 to March 2022, increasing international tourism by 214% and attracting a total of 24 million visits to the event, according to government data.
“Because of Covid, prices dropped significantly in real estate in Dubai, but as soon as the Expo started, they jumped,” he said. “I can see a similar demand right now with the Qatar World Cup.”
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But with luxury real estate accounting for just 5% of Dubai’s property market, World Cup-related sales are unlikely to have a significant impact on the market as a whole, warned Haider Tuaima, director of real estate research at ValuStrat, an international consultancy group based in Dubai. .
The tourism boosted by the six-month expo was on “a much larger scale than the World Cup”, he said. “As far as Dubai is concerned, I think there will be an impact, but whether it is significant or not? I doubt.”
The impact will be partly mitigated by the fact that Dubai has already seen a meteoric rise in demand and prices for prime and ultra-prime properties over the past two years, after an initial dip in the early months of the pandemic. . “We have seen a clear trend of end-users as well as investors opting for larger homes: larger villas, townhouses or apartments,” he said.
Property prices in the Jumeirah Islands have increased by an average of 96% since the third quarter of 2020, he added. In Palm Jumeirah, where the majority of the city’s mansions are located, prices rose by an average of 90%, and Downturn Dubai saw average price increases of 87% in the main area, he said. Growth slowed slightly from 2021 to 2022, but the entire prime real estate sector jumped 88.8% in the 12 months September of this yearworld’s first Knight Frank index.
Lockdowns in many countries made it difficult for foreign buyers to travel for much of 2021, meaning the initial surge in demand for prime properties was largely driven by domestic buyers, Mr Tuaima said. .
But international investors have returned to the market over the past year, partly spurred by Dubai’s visa reforms, expanding them in November 2020 to grant five- or 10-year renewable residency permits to investors, entrepreneurs and certain professionals, as well as to anyone. invest more than AED 2 million (USD 544,500) in real estate.
“We are seeing an influx of high net worth buyers looking to move to Dubai as their primary residence,” Ms Deylami said. “The migration and investment of very wealthy people from around the world in Dubai during and after the pandemic, and the very limited supply of high-end products such as luxury penthouses and mansions, are the main factors for the increase in sale prices and demand for luxury property in Dubai.”
Rent prices have also risen sharply since the start of the pandemic. Average apartment rents rose 24.9% year-on-year in August, according to real estate services and investment firm CBRE. Although they remain about 20% below the last peak in 2014, Mr Tuaima said, “the fact that rents are rising actually gives sales an additional boost because rather than paying rent every month , it is better to take out a mortgage”.
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The UAE has raised interest rates in tandem with the US Fed in recent months. Uncertainty around mortgage repayments has pushed some buyers towards off-plan properties that offer fixed-rate payment plans, he added.
Changes to residency visa rules have also made off-plan properties more attractive to overseas buyers.
“Before July of this year, the rule was that you had to have a property ready,” Ms Ibrahim said. “Now the rule has changed.” Off-plan properties are now included in the visa regime, along with properties purchased using loans from some local banks.
Overall, the rise in interest rates should not have much impact on the main market, due to the dominance of cash buyers. “Statistically only 19% of all sales are mortgage-based, so you’re talking 81% cash transactions,” Tuaima said.
After two years of rapid growth, he expects house prices to stabilize in the coming year.
“Over the past six months, there has been a slowdown in capital growth. It was around 5% per quarter. Now we are talking about 3.6% or 3.5%,” he said. “Some areas may have already reached their price caps.”
There are already signs of a slowdown in the low-end market, where there has been very little price movement for 12 months, he added.
While the strength of the US dollar has favored some buyers, the weakening of the euro has diminished purchasing power for others. “We are simultaneously working to educate our clients on both sides of the fence about changing market conditions, the depreciation of the Euro, as well as the global market crash that has occurred in the stock market,” said said Ms. Deylami. “We are still very bullish on the Dubai property market.”
It expects the core market to stabilize next year, with continued price growth in the luxury sector due to strong demand. “There is still a shortage of prime real estate in Dubai,” she said. “We receive daily requests for luxury ready units and very limited availability, which drives the prices of the ready units much higher. I expect the same trend throughout 2023.”
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