Asteco 2023 Q4 Report: UAE Real Estate Market Surges Amid Global Uncertainties

According to the Asteco 2023 Q4 real estate report, the UAE market witnessed unprecedented growth during 2023 despite the various global challenges. The report anticipates continued positive trajectory over 2024. Key strategic initiatives, including the UAE Tourism Strategy 2031 and 'We the UAE 2031,' are expected to fortify the UAE's standing as one of the premier destinations globally.

2023 Highlights

In 2023, record-breaking figures were observed in terms of individual unit sales values, transactional volumes and project launches. The luxury market attracted significant attention, showcasing some of the most remarkable transactions to date. 

The surge in transitioning annual leases into short-term rental properties for short-term gains and the lag in new deliveries stemming from Covid related development delays have amplified the supply-demand dynamics at play, and ultimately resulted in heightened rental pressure. 

Whilst Dubai has remained a focal point of attention, other emirates including Abu Dhabi, Sharjah and Ras Al Khaimah, asserted their presence in the real estate sector, marked by a substantial surge in new project launches.

Aldar's strategic entry into the Dubai market through the introduction of Haven, coupled with its ongoing expansion into Ras Al Khaimah, served as tangible evidence of vibrant market conditions prevailing throughout the UAE. 

Abu Dhabi Residential and Office Market 

The report indicates that during 2023, the Abu Dhabi real estate market market marked the delivery of approximately 6,500 residential units distributed across key international investment zones such as Al Raha Beach, Al Reem Island, Yas Island and Saadiyat Island. Noteworthy residential projects were launched throughout the year, in key locations including Yas Island, Al Reem Island, Ghantoot, Saadiyat Island and Balghaiylam.

The market also welcomed the entrance of new developers, enriching the landscape and contributing to the diverse range of offerings.

The market observed dynamic shifts in rental rates, influenced by a surge in new residential supply. Notably, low- and mid-quality properties within the city faced increased pressure from newer, better-quality developments which have prompted rental adjustments. Prime and high-quality apartments experienced substantial annual increases, ranging from 5% to 10%, contributing to an overall average annual growth of approximately 3% across the market.

The villa market continued to exhibit robust demand, particularly in new communities of Saadiyat Island and Yas Island, observing average increases of close to 10% last year. 

Office rental rates recorded a notable surge with increases ranging from 5% to 10%, driven by a scarcity of prime office space, heightened demand from expanding businesses and proactive government initiatives aimed at attracting foreign investment. 

Comparable to the rental market, sales prices exhibited nuances, with developments with lower-quality specifications undergoing corrections while high-end properties experienced increases.

Prime villa communities continued to experience high demand, with select communities recording notable sales price growth of up to 20% since 2022. 

The sales market also saw sustained interest in off-plan developments, especially high-end ones, with notable participation from foreign investors, particularly Russian and Chinese nationals. 

Some high-end developments reported sales price increases of up to 15%, between the initial launch and the most recent phases. This trend underscores the robust demand for premium off-plan residential units, signaling a strong appetite for high-quality real estate offerings in the region, particularly from reputable master developers.

In 2024, the Abu Dhabi real estate market is poised for growth with projects currently in the planning stage slated for launch and an anticipated completion of over 7,000 residential units.

Dubai Residential and Office Market 

In 2023, Dubai recorded a flurry of new project launches. The launches (by volume of units) reached levels not seen since pre-Global Financial Crisis (GFC). Residential supply increased significantly with the delivery of an estimated 34,950 residential units (13% increase from 2022), comprising 27,450 apartments and 7,500 villas.

Meanwhile, the commercial sector registered the delivery of approximately 650,000 sq. ft. of new office space. 

Whilst residential rental rates continued their upward trajectory, rental growth slowed towards the end of the year. Average apartment and villa rents increased by 2% and 3% over the last quarter of 2023, and by 15% and 14% year-on-year (YoY).

In the commercial sector, however, the strong rebound which started in 2022, continued unabated. There was a notable surge in demand and pricing, particularly for Grade A office space. Demand has been stimulated by new entrants and existing companies looking to increase their footprint. 

In Q4 2023, despite the moderation in sales price growth, transactional volumes remained robust, particularly in the off-plan sector. Average sales price growth for apartments and villas experienced a modest increase, averaging 1% and 2% over the quarter, whilst annual growth stood at 10% and 12%, respectively. The luxury residential segment continued to set new records across both beachfront locations and desert destinations. 

Asteco anticipates the delivery of over 45,000 residential dwellings and approximately 500,000 sq. ft. of office space over the course of 2024. It is worth noting that, as in previous years, certain projects may face delays, potentially leaning into 2025.

Al Ain and Northern Emirates Market 

Market sentiment in Al Ain remains optimistic, with positive demand observed across all main asset classes. Apartment rental rates remained broadly stable over 2023, with selective corrections in lower-quality properties. Conversely, high-quality villas experienced notable rate increases, ranging from 3% to 5% respectively. The office sector experienced an uptick in demand, marked by an increase in absorption rates. 

Moving to 2024, the report anticipates a continuation of the stable-positive trajectory observed over 2023. 

The market of Northern Emirates exhibited notable signs of recovery and growth over the course of 2023 and was characterised by a consistent upward trend in both sales prices and rental rates.

In the rental market, whilst rental increases were generally modest, there were marked increases within the high-end segments of Sharjah and Ras Al Khaimah (RAK), with rates gaining further momentum towards the close of the year. Average apartment rates across the Northern Emirates demonstrated a gain. 

Asteco observes that the groundwork laid in 2023 positions the Northern Emirates real estate market for sustained growth in 2024.

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