The Gulf Cooperation Council (GCC) real estate market is witnessing an unparalleled expansion. The total value of real estate projects currently planned or under construction in the region stands at an estimated $1.68 trillion, up from $1.38 trillion in 2023, according to the CBRE Group. Residential real estate dominates the GCC market. The sector has been predicted to reach $5.05 trillion by 2028, driven by new government initiatives and increased demand from local and international investors.
“The region offers a luxurious lifestyle with top-tier amenities, and rising affluence and population growth drive increasing demand for luxury properties,” Andrew Cummings, Head of Residential Agency at Savills Middle East told Finance Middle East. “These factors combine to make the Middle East a sought-after destination for investors seeking high returns and prestigious assets.”
The drivers of this outstanding market growth are hardly a mystery but they remain difficult to replicate. The region’s exceptional services and amenities, including world-class healthcare facilities, high rental yields, capital appreciation, and favourable tax and visa policies have driven investors, entrepreneurs and retirees to acquire property. The Middle East’s easy access to other countries through well-connected airports and international transportation networks enhances its appeal as a destination for luxury real estate investment and cultural experiences. But where will the industry go from here?
Outstanding recovery
GCC real estate companies have witnessed the market’s extraordinary recovery following the pandemic. Saudi Arabia and the UAE have led the way, with the two nations accounting for 63.1% ($1.06 trillion) and 24.4% ($409 billion) of the total value of real estate projects currently planned or under construction in the region, as per the CBRE Group. Oman ranked third, accounting for 5.2% ($87 billion) of the total value, followed by Kuwait with 3.2% (54 billion), Qatar with 2.9% ($48 billion) and Bahrain at 1.3% or $21 billion.
Amongst this growth, the GCC has seen an increase in demand for luxury real estate properties, as a reflux of an influx of high-net-worth individuals (HNWI) into the region.
“Amidst the global challenges, the luxury residential real estate market has demonstrated remarkable resilience, swiftly rebounding and entering a robust growth phase,” said Cherif Sleiman, Chief Revenue Officer at Property Finder. “We have closely observed this resurgence seeing a notable increase in available properties, the mid-market as well as offering property seekers a wide range of options to choose from.”
The Dubai boom
When asked about the cities with the fastest growth in the global luxury real estate sector, analysts instantly named Dubai, followed by Sydney or Miami. Ease of business, geographical location, price per square foot, individual and corporate security levels and standard of living for individuals and families all contribute to making the UAE attractive to HNW families worldwide.
In 2023, the emirate recorded 431 home sales above $10 million, nearly 80% higher than London’s 240, and more than 3,800 transactions above Dh10 million, according to Savills and Knight Frank data. As such, residential property values in the emirate have risen for the 11th consecutive quarter, reaching an accumulative 30% price surge since Q1 2020.
“Dubai stands out as a beacon of growth in luxury residential real estate,” said Istvan Juhász, co-founder and CEO of Shard. The city attracts millions of visitors annually, bolstering demand for luxury residential and commercial properties, especially those near major tourist attractions and amenities. The diversity in property types, from upscale apartments to extravagant villas, provides ample choice for investors.”
Looking at the best-performing areas, Knight Frank’s analysis concludes that apartments in Dubai South have experienced one of the strongest growth rates, with prices increasing by 73% over the last 12 months. Following closely are Jumeirah Lakes Towers (67%) and Umm Suqeim Third (37%), with approximate prices of Dh1,150, Dh1,780, and Dh2,860, respectively.
“The UAE’s reputation as a safe investment haven attracts HNWI seeking stability and asset diversification, supported by proactive government measures like visa reforms and infrastructure investments,” Cummings commented.
Dubai’s forecasted growth rates indicate a moderation towards a more sustainable pace in 2024, projected to range between 4% and 5.9%, according to the Savills Prime Residential Index. This transition signifies a shift towards a more stable market environment, albeit one that continues to offer lucrative opportunities for investors.
Ensuring supply
With such tremendous demand, the question arises as to whether the supply of luxury real estate will be able to keep up. “If you had asked me this question last year, I would have said no,” noted property expert Barnaby Crompton, who now believes that “supply and demand are going to cancel each other out”, leading to a “steadying of the ship”.
“We will still see high prices achieved for exceptionally well-located, well-built and finished properties,” he predicted. “I foresee a much slower, manageable increase in house prices moving forward.”
In Q1 2024, the Dubai government reported over 25,000 new residents. At the same time, there are typically, on average, only around 50,000 properties handed over every year. As such, the ability of supply to keep pace with the robust demand hinges on a complex interplay of market dynamics and economic factors. Those numbers, Cummings explained, “mean that developers will have to work hard to make sure that supply catches up with demand.”
In order to safeguard investments and maximise returns, analysts advise real estate companies to emphasise the importance of location when investing in properties and investors to focus on securing those exceptional deals—properties that represent the top 1% of the market. These properties are expected to remain in high demand, regardless of market fluctuations.
“Currently, the real risk is that oversupply will develop, and prices will collapse, as in 2014,” Juhász said. “However, Dubai has learned and evolved from the past, consciously maintaining high demand and leveraging its current momentum.”
The new “dream home”
The pandemic turned the entire real estate market on its head. Four years later, buyers have redefined the ideal real estate investment, considering more factors when selecting properties. This shift is shaping a new narrative for luxury real estate in the UAE, with more people looking for pet-friendly and green environments, gated communities and lifestyle amenities, reflecting an increased sense of comfort, convenience and quality of life.
One key example of this change is the rising interest in detached properties and villas. Property Finder’s 2024 data revealed as many as 40% of home seekers are looking to buy villas, with 85% looking for properties with three bedrooms and above. Moreover, a “wave of youthful enthusiasm” is sweeping the villa ownership scene, as 39% of buyers were under 40 years old in Q1 2024 compared to just 31% during the same period a year prior.
“The UAE continues to be a place that has something to offer for everyone and property is no different,” Sleiman said. “Notably, the supply chain is also becoming more diverse.
“The market is witnessing increased diversification, and the completion of off-plan projects initiated in previous years will contribute to a balanced market, accommodating various client preferences. Ownership trends are shaping new ways of living, with a rise in short-term rentals and flexible living options.”
Accessibility and affordability are also two key trends the sector is experiencing. As the desire for property ownership grows, more individuals are exploring co-ownership to invest in real estate without bearing the entire financial burden upfront. More specifically, there is an increasing curiosity about how premium real estate can be made more affordable without compromising quality.
“This model not only makes luxury real estate more attainable but also stimulates market growth by expanding the pool of potential investors,” Juhász noted. “This, in turn, contributes to sustained demand and ensures the ongoing vitality of the prime residential market.”
In the short term, the GCC luxury real estate market is likely to continue its growth trajectory, driven by factors such as high demand, net inward migration of HNWIs, low interest rates and favourable government policies. The distribution and amenities of the most sought-after properties might evolve, but their prime location within the GCC is poised to remain unchanged.