Dubai Still Booming

Residential Property Prices in Dubai

Source: BIS, Datastream

  • Two years on from our last comment on Dubai, real estate in the emirate continues to boom. Indeed, residential property prices are now closing in on their 2014 highs, as our Chart of the Month shows. Amidst this buoyant environment, Emaar Properties’ development arm, the industry’s dominant player, achieved a record $10.2bn of presales in 2023, up 22% YoY.
  • The real estate revival has reflected policy stimulus during Covid, the introduction of a more generous visa regime in 2022 and a rebound in investment demand. The Fed rate hiking cycle has had little impact on a market dominated by cash transactions.
  • Emaar expect to post another presales record this year, with end-user demand growing solidly and ongoing high levels of investor interest.
  • Dubai’s population is expected to increase from 3.65mn in 2023 to 5.8mn by 2040, creating an underlying demand for new home construction, whilst expat home ownership has been steadily climbing but remains below 30%.
  • As for investor demand, the big boost that has come from Russian buyers (10-15% sales) in the last two years is likely to fade. However, Chinese demand still has some way to go to reach pre-Covid levels whilst UK, Indian and Saudi interest remains strong. Dubai property is still relatively cheap compared to other major global cities and apartments offer a gross rental yield of 7.5%.
  • Meanwhile, although 2023 saw a record number of new units launched it will take some years for these to be delivered. In the meantime, the subdued level of launches during the pandemic means that incremental supply is relatively modest this year and next. The balance of probability, then, is that residential prices will continue to rise, albeit more moderately from here.
  • The outlook for Emaar’s other businesses also looks constructive. Office rents are rising since new supply is limited whilst demand remains firm. And the hospitality and retail segments should be boosted by ongoing strength in tourism, which has now risen to above pre-Covid levels.
  • On 0.7x 2024 P/BV and less than 7x P/E, Emaar’s shares still look attractively valued; earnings have the capacity to surprise positively since consensus looks unduly conservative on the pace of property development revenue recognition and margins; and returns to shareholders are improving, with this year’s dividend yield likely to be in the region of 5.8%.
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