Real estate outlook positive in Dubai and Saudi Arabia

A new Deloitte report anticipates growth across residential and commercial sectors in 2023

The real estate markets of Dubai and Saudi Arabia are poised for further growth in 2023, mainly driven by the spurt in residential sales across both countries, according to Deloitte.

In its ninth annual ‘Middle East Real Estate Predictions 2023’ report, Deloitte provides a positive outlook for the next 12 months and investigates a range of real estate segments, including hospitality, residential, retail, commercial office space and industrial.

Among the main findings, the report reveals the recovery post-COVID-19 of tourism in both Dubai and Saudi Arabia, with the key indicators within the hospitality sector being the increase over the past year in occupancy and average daily rates (ADR). It also highlights the growth in residential sales across both geographies, as well as the rise in rent prices of commercial office space in Dubai.

According to Deloitte, the significant growth of KSA’s gross domestic product is making it among the most attractive global destinations for investors. Moreover, employment forecasts from Oxford Economics indicate the financial and business services segment registered a year-on-year growth in Saudi Arabia of 12%.

In early January 2023, Realiste predicted that the Dubai real estate boom would continue in 2023.

Stefan Burch, Partner and Head of Real Estate at Deloitte Middle East said, “As global economies fully re-open post pandemic, we predict continued growth in the Saudi real estate market throughout 2023. Growth is set to be driven by robust spending across a wide range of government initiatives as well as a strong private sector that is responding to pent up levels of demand for good quality real estate projects. While 2022 saw record levels of demand for commercial office space, 2023 looks set to be dominated by the delivery of high quality residential-led mixed use schemes and a continued focus on tourism, leisure and entertainment projects.”

On Dubai’s real estate performance, Deloitte said the pent-up demand from travellers and increased spending by residents had led the post-pandemic recovery of the emirate’s real estate sector.

Oliver Morgan, Partner and Head of Development in Deloitte’s Real Estate team in the Middle East said that 2022 had been a prosperous year for residential investors who had a tough time looking back at more recent trends in Dubai. He commented, “In Saudi Arabia, there continues to be excess demand across all residential sectors with more volume housebuilders competing for market share and to differentiate their product.”

According to Morgan, the year to date (YTD) November 2022 occupancy for Dubai averaged 72% compared to 63% for the same period in 2021, while the average ADR over this period has increased by 22% year-on-year to $183. This is higher than the majority of the regional and international markets, he added.

In early January 2023, Investcorp said that it would invest $1bn into the GCC real estate market in five years.

Meanwhile, the average sales prices for residential properties in Dubai increased by approximately 10% between 2021 and 2022. Average rents also increased by approximately 21% over the same period. On the commercial front, office rents have recovered to pre-pandemic levels, registering an increase of 12% YTD September 2022 over the same period last year.

In early January 2023, JLL said that the global realty investment boom would be led by the GCC.

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