Dubai’s property market has long been synonymous with luxury, but a change is taking place. The mid-market sector is emerging as the fastest-growing and most in-demand segment, potentially challenging the dominance of the luxury market.
“Dubai’s property market traditionally focused on high-end homes for the affluent, but now, there is a rise of more affordable options for the average professional,” Anna Skigin, CEO of Frank Porter, said in an exclusive interview.
John Lyons, Managing Director of ESPACE, argued that the mid-market doesn’t need to challenge the luxury market for dominance. “It has always been the more in-demand market despite the fact it doesn’t hit so many headlines,” he said.
However, he confirmed that the mid-market segment “has always been, and will always be the fastest and most in-demand sector of Dubai’s real estate market.”
According to a recent Knight Frank analysis, the total value of luxury homes sold in Dubai during the first quarter of 2024 surpassed $1.7B, up 6 percent from the same period in 2023.
“This surge reflects a positive outlook for the city’s real estate sector. From branded residences to seaside mansions, high-end properties have primarily been purchased by investors from the United Kingdom, Russia, and China, who are drawn to the emirate by its appealing lifestyle and advantageous tax policies,” said Gul Tabba, Developer at Lucky Aeon Real Estate Development.
However, he notes the recent shift in the market, stating that “The days of luxury reigning supreme in Dubai’s property market are over, and buyers are now seeking value, unwilling to compromise on quality. Enter the thriving mid-market segment.”
Earlier this year, Arabian Business reported that Dubai needs more mid-market properties to expand the range of investors as the country moves towards a growing population in line with Dubai’s Urban Master Plan 2040.
This predicted demand is despite the fact that the UAE has more than $356B allocated to private real estate developments and ongoing public building and housing programmes.
“Dubai’s Urban Master Plan for 2040 projects to reach a population of 7.8M by that year. As the city’s demographics continue to grow and diversify, demand will follow, and developers will have to introduce new projects to cater to a wider range of budgets,” Lyons said.
“The focus here is on affordability, as historical data reveals that more than 60 percent of purchases are below AED 3M, showcasing the significance of bringing high-quality mid-market developments,” he added.
According to Deloitte’s latest Middle East Market Predictions Report 2024, “The residential market has sustained an upward trajectory, marked by unprecedented transaction levels in 2023 along with an increase of 18 percent and 26 percent year-on-year for sales prices and rents respectively.”
Top areas for sales price growth:
- Palm Jumeirah (apartments)
- Dubai South
- Mohammed Bin Rashid (MBR) City
The data revealed that the secondary market accounted for over 41 percent of transactions last year, with areas such as Business Bay, Downtown Dubai, and Jumeirah Village Circle (JVC) recording the highest number of transactions.
The report supported the fact that the Dubai property market continues to be dominated by “cash buyers” with demand for affordable villas and townhouses driving activity in this segment.
“The middle class globally is growing, with more than 110M people expected to bump into the middle class this year, according to research by Visual Capitalist,” Skigin said.
“As Dubai continues to develop both its business and tourism offering, the requirement for people to come and work in the industries supporting the city’s growth will continue. And these people need places to live,” she said, in favour of the mid-market.
“For some context, the number of properties to sell in the 2 to 5M price segment was 500 percent more than the number of properties that sold in the over 10M price segment in Q1 this year (residential market),” Lyons highlighted.
Additionally, the mid-market segment presents opportunities for investors in search of lucrative rental yields, experts affirm.
Dubizzle’s 2023 Annual Property Rental Market Report points to communities like Jumeirah Village Circle, which saw a staggering 32 percent increase in average annual rents from 50,000 in 2022, to 66,000 in 2023.
“Another factor driving Dubai’s mid-market growth is the ease at which sole traders and small business owners can set up here. The emirate encourages entrepreneurship and this keeps the middle classes flocking,” Skigin said.
As these residents launch their businesses they form stronger ties with Dubai, and make plans to settle down long term – and with the rental prices and interest rates remaining high, there is more reason than ever to buy,” she added.
Although, the luxury property market is on the rise including the launch of several new branded residences, “this also out-priced many people who are now looking for these more mid-market options.”
Adapting to a growing population:
As Dubai’s population grows, the city expands to meet the housing needs of a diverse and increasing population. The launch of more competitively priced residential units and the rapid uptake of properties in up-and-coming communities reflect a clear demand for mid-market housing.
“The city is expanding to make way for the people coming into the market who are not necessarily looking for luxury homes,” Skigin explained.
The UAE government continues to make housing more accessible, through schemes such as Golden Visas and retirement programmes. These moves have attracted a broader demographic of investors and residents alike.
While Dubai’s luxury property market continues to thrive, the mid-market is emerging as a vital and rapidly growing segment. With ongoing developments, government incentives, and a changing demographic landscape, the mid-market is on an upward trajectory.
“Population growth goals can only be achieved with the ongoing development and rapid supply expansion of the mid-market as this supports the accessibility and affordability of Dubai’s work/lifestyle offering,” Lyons concluded.
