Nikoliers’s research: Dubai neighborhoods with the highest average annual growth in apartment prices have been named

The international consultancy Nikoliers has conducted a study of 141 projects from 17 key developers in Dubai. Find the success factors for short-term property investment, the top 3 areas with the highest increase in value per sq ft and an assessment of the market potential in the brief results of the report.

Dubai, January 31, 2024. Flipping – buying an off-plan property at the official launch stage for resale before its commissioning – remains one of the classic real estate investment strategies. This particular model is so popular in Dubai due to several factors: high demand for real estate (average annual growth in demand for off-plan apartments stood at 34% over the past 4 years), steady price growth (within 10% per year over the past four years in the segment of off-plan apartments), the availability of interest-free instalments, as well as a favorable legal environment.

“In most cases, the best buying point comes before the project commissioning, i.e. before the last instalment,” explains Andrey Kosarev, partner at Nikoliers. “According to statistics, on flipping the growth in value for a wide range of off-plan projects over the entire construction period (3-4 years on average) is 30-40%, the return on invested capital reaching up to 60%, due to a stable growth of the market and interest-free instalments during the period of construction.”

Nikoliers analysts conducted a study to find out how developer and location factors influence the investment potential of various projects. The analysis showed that flipping yields in retrospect vary from one developer to another. Reputation in the market, quality of construction, the company’s marketing strategy, the developer’s ability to quickly adapt to changes in the property market, taking into account the requirements of the target audience – all these factors together affect the return on investment in residential property.

To confirm this proposition, Nikoliers has assessed the average annual price growth in the projects of 17 key developers from the official launch to first resales after commissioning on the secondary housing market. In order to make the assessment relevant to today’s prices, the sample included projects where first transactions after the property handover were concluded in 2022-2023.

The developers with the most stable project results were Emaar Properties, Meraas, Ellington Properties and Binghatti, with 80-90% of the reviewed projects delivered by these companies yielding the positive average annual price growth.

The highest price growth is observed in Meraas and Binghatti projects. Thus, the average annual price growth for these projects stood at 10-11%, which corresponds to the general market trend. Nevertheless, there are projects where prices grew more dynamically: Port de La Mer (+18%) by Meraas Development, as well as Binghatti Canal (+13%), Binghatti Jasmine (+18%), Binghatti Mirage (+18%) and Binghatti Rose (+17%) from Binghatti Holding Limited. Emaar Properties’ average increase in per sq ft prices stood at 5%, though there are more successful projects outperforming the market growth: Bayshore at Creek Beach Building 1,2 (+12%), Beach Isle Tower 1 (+12%), Marina Vista Tower 1,2 (+14%), Summer at Creek Beach Building 2 (+13%). Prices in the project by Ellington Properties Harrington House in JVC (Jumeirah Village Circle) showed the average annual growth of 14.5%.

Chart 1

Range of average annual growth in per sq ft prices from the official launch to first resales after handover on the secondary housing market in the projects of key developers with the most stable results for their projects*

* We present results for some of the key developers, with 80-90% of their projects yielding positive average annual growth in sq ft prices from the official launch to first resales after handover in the secondary housing market.

Another factor influencing the potential for short-term investments is the neighborhood. Buyers and investors are generally interested in acquiring properties in sought-after and favorable areas with developed infrastructure, good transport accessibility and proximity to key sites in the Emirate. Special attention is drawn to promising areas with high potential for property value growth.

To study the impact of the neighborhood factor on property yield, Nikoliers analysts considered only projects where the first resale transactions after the handover on the secondary housing market were concluded in 2022-2023.

The analysis showed that Dubai Harbour, Port de La Mer and JVC demonstrated the highest average annual growth in per sq ft prices, with yields ranging from 7% to 10% per annum.

Table 1

Ranges of average annual growth in per sq ft prices from the official launch to first resales after handover on the secondary housing market in the projects of key developers (by neighborhood)*

* The neighborhoods where at least 6 projects of key developers were located (lots were resold for the first time after handover on the secondary housing market in 2022-2023) and where there was a positive average annual price growth from the official launch to first resales after handover on the secondary housing market are considered.

** Boundary values of the average annual increase in per sq ft prices by neighborhood (in the developers’ projects under review).

The obtained results reflect the unevenness of price growth dynamics in developers’ projects by neighborhoods. This confirms the need for a comprehensive approach to short-term property investment, where, first and foremost, the key factors considered in our research (market, developer, neighborhood), and ideally a set of parameters including transport accessibility, architecture, infrastructure, a number of green spaces, location masterplan, etc., should be taken into account.

“Given the strong fundamentals driven by infrastructure investment, Dubai’s growing attractiveness, population growth and booming tourism, we expect property prices to continue their climb in the long run. And with a proper all-encompassing approach, it is possible to squeeze the most out of the ‘flipping’ investment strategy,” Mr. Kosarev concludes.

Glossary

Pre-launch – the project release stage to the official launch, when it’s possible to make reservations.

Official launch – an official launch of project sales.

Handover – the process of titling and transferring the property to the owner.

Flipping in real estate* – short-term real estate investments; buying property at the official launch stage for further resale within a short time (in the process of construction) for profit earning.

Off-plan and Ready housing – projects under construction and ready-to-use real estate.

Primary and Secondary housing – off-plan and finished or usable residential real estate.

* This is one of the definitions of flipping, applicable to the given research, but there are other definitions, such as property purchase for the purpose of renovation and subsequent resale.