According to the Quarterly Economic Review by the Central Bank of the #UAE, the GDP’s growth continues to be driven by tourism, transportation, construction and real estate, financial and insurance services, and communication sectors.
The UAE non-hydrocarbon GDP growth forecast is expected to remain strong at 5.2% in 2024 and 5.3% in 2025. Strategic plans and policies that the UAE government has undertaken to attract foreign investments, along with ongoing structural reforms, including 100% ownership of foreign businesses and tax reforms. In addition, domestic consumption is expected to stay robust, sustaining GDP growth going forward, as the UAE average employee salary increased by 4.8% Y-o-Y.
In mid-September, UAE Central Bank, following the #US Fed announcement, cut its Base Rate by 50bps, from 5.4% to 4.9%. As the AED (Dirham) is pegged to the USD and the interconnected nature of the global financial systems, this move aligns the UAE’s monetary policy with the United States.
The start of the interest rate cut cycle from the Central Bank of the UAE and other central banks, will lead to a fall in mortgage interest rates in the coming months. As the statistical correlation between the interest rate and real estate prices shows, the UAE real estate sector growth will be sustained by the surge in investment.
Indeed, as borrowing costs decrease, it will drive up the demand for real estate investment, amplified by the large proportion of cash buyers present in the UAE real estate market and the fast absorption rate of new rental properties, showing a robust demand for rental even as the supply grows. Additionally, borrowers with variable-rate mortgages will experience lower instalment payments and will have the possibility to refinance. Furthermore, developers and institutional investors will secure financing for new projects at a lower cost.
Despite the recent spike in prices, the price per square foot remains extremely competitive, as it is still relatively cheaper compared to London, New York, Paris, or Singapore. Also, the high tax-free Return On Investment, will add new driving factors to a new boost in demand for real estate property investment. It will attract leading international investment firms, which are eyeing the region for their expansion, building on the resilience and robust performance of the UAE’s global economy.
A notable expansion project to mention is the new area of Dubai South with developments such as the USD 35 billion Al Maktoum International Airport, which will be the world’s largest airport, or the Palm Jebel Ali, a 17.5-square kilometres project designed to accommodate 250,000 people. Those global expansion projects will sustain the long-term growth, strengthen the UAE position as a global hub and further boosting its position to international real estate companies and overseas investors.
Ultimately, Dubai real estate market has experienced continued growth in demand, and the dynamic economic environment has driven a significant increase in rental rates. Several market experts expect that rates could climb by an additional 20% by the end of 2024. According to the Dubai Land Department data, in H1 2024, the city has recorded more than 190 sales exceeding USD 10 million, reinforcing the attractiveness of the emirate for HNWIs and UHNWIs, driving demand for luxury and branded residences.
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