Luxury real estate market trend

June 1, 2018

Despite the popular assumption that most of Dubai’s real estate stock and transaction volumes are concentrated in the prime/luxury end of the market, this sector represents just 3% of the emirate’s residential transactions in 2017, according to Core Savills’ new report, ‘Global Comparisons – Around the world in prices and yields’. The report says that prime and ultra-prime property prices in Dubai are now amongst the lowest of any comparable global hub.

Notably, prime properties in Dubai are approximately 40% less expensive than Singapore and 50% less than Moscow and Paris. Dubai’s ultra-prime market is also relatively inexpensive compared to Shanghai and Tokyo, where average prices are almost 60–70% higher than the emirate.

The long-term investment potential in Dubai’s prime segment is reinforced by a nominal tax regime and notably low real estate investment costs. These costs – associated with buying, holding and selling property – in cities such as Hong Kong are approximately 32%, while costs in Singapore and Tokyo are nearly 20%, representing an additional charge equivalent to almost a quarter of the value just to buy, sell or hold property. With notably low buying and selling fees, and almost no holding charges, investment costs in Dubai amount to just 8%. These costs have a significant impact on any comparison of prospective investment yields in different cities across the world says core Savills.

“Given Dubai’s position as a global tourist destination and regional economic hub within five hours flying time to around one third of the world’s population, strong underlying demand for prime and ultra-prime properties is expected to be sustained in the long run. As the market grows and continues maturing, adding depth and liquidity on the back of population growth, the demographic pressure is also likely to continue moulding the cityscape in a way that will make core area prices appreciate and stabilise” says the new report.

 

Looking further out at prospects for the high-end housing market,

It would a huge mistake to assume that the kind of high-end houses baby boomers and Gen-Xers wanted then are what the next generation of affluent millennials will want in the future. John Zogby, author, founder of the Zogby International Poll and fellow Forbes.com contributor, predicted homes for the next generation will be “leaner, smaller, more personal and personalized,” as millennials will aim for a lifestyle where they live within limits.

Affluent millennials don’t buy the idea that bigger is better when considering a home. They don’t want the McMansions that boomers and Gen-Xers favored. Rather they are opting for smaller footprint homes on small plots of land in closer-in locations with luxury defined by finer details and better-quality fixtures, and amenities, not square footage.

And while millennials desire smaller primary homes closer to work, Unity Marketing’s research with next generation affluents found that they also dream of owning a second home for weekends and vacations. As their incomes rise, two more modestly priced homes will add up to a comparable level of investment as one big luxury home. But the types of homes they will want for their first and second homes will be vastly different.

Disruption is coming in the high-end home market. The big, high-priced suburban homes that are clogging the housing inventory will find fewer buyers, as affluent millennials look for new American dream homes that fit their lifestyles.

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