Why Dubai real estate did not feel the crisis and rising rates?

One of the key differences between the Dubai market during the Covid compared to other global crises is that this crisis did not hit Dubai.

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One of the key differences between the Dubai market during Covid compared to other global crises is that this crisis did not hit Dubai. When interest rates began to rise in 2022, there was much speculation that it would affect the real estate market in the last quarter of the year, and the full impact would be felt in January 2023. But that didn't happen in Dubai. On the contrary, real estate sales are up 128.5% year over year, a clear indication that the market is not going to slow down anytime soon.

How is that possible?

Bear market rallies are deceptive to investors, as short-term spikes in stock prices can seem like signs of a rebound after a prolonged downtrend. After a surge at the beginning of the year, U.S. markets are now in a correction, mostly tied to the end of 2020, and changes in prices or market conditions have not caused it to decline. Instead, they have changed the nature of that demand. As property values in Dubai have risen, there has been a significant shift in the affordable luxury segment - once affordable properties have increased in price by 20% (or even 30%) and have made their way into the premium market (AED 5 million and above). Because of this, many buyers with leveraged mortgage were cut off from transactions (down payment on the mortgage rose from 20% to 30%). But the volume of transactions increased compared to last year. Why? Because the Fed may have to keep rates higher longer to beat inflation.

The demographics of buyers in the community have changed. The number of local leveraged transactions has decreased, but there is significant demand from cash buyers from around the world and a steady influx of those buyers. The end result is a continued rise in the market.

One cannot be sure, but because of geopolitical tensions and the opening of China, it will last long enough. Also, Dubai has already asserted itself in such a way that it does not need some kind of event to get noticed - growth is becoming organic. A slowdown in the market will inevitably come, but given the volume and level of inquiries we and the developers receive on a daily basis, this slowdown will not come for a long time.