Dubai dominates as top choice for UHNW primary residents

Based on the Residential Real Estate 2023 report by Wealth-X & Realm, while Dubai is a smaller city compared to Monaco and Los Angeles, it has the largest share of UHNW (individuals with a networth above US$30  million) primary residents, which is two-thirds of its UHNW population. About 67% of the approximately 830 UHNWIs identified that are based in the city treat Dubai as their primary residence, while the remaining 33% choose Dubai as a secondary home.

Dubai’s UHNW cohort also has the youngest age distribution of the three cities, with a lower proportion of homeowners over the age of 70 compared to Monaco, according to the report. Among the ultra-wealthy population in Dubai, 91% are male, surpassing the male representation in Monaco and Los Angeles, as well as the global ultra-wealthy population (89%). In terms of nationality, the top three countries by origin of primary residence among secondary home owners are the UK, France and Switzerland.

Another interesting finding is that only 1.4% of UHNWIs in Dubai are known jet owners, while 0.7% are known yacht owners.

In terms of interests and hobbies, Dubai’s ultra-wealthy homeowners prioritize sports, public speaking, and technology, which sets it apart from the other two cities. Furthermore, Dubai’s ultra-wealthy individuals exhibit the lowest share of self-made fortunes, but also the lowest prevalence of solely inherited wealth. Almost 40% of Dubai’s UHNW individuals have combined self-created wealth and inherited capital to amass their net worth, a higher proportion than the global average. This can be attributed to the concentrated distribution of wealth in the UAE and the above-average share of privately owned family businesses.

Although the oil sector remains a core driver of growth and wealth creation in the UAE, the government is focused on strengthening Dubai’s position as a regional business hub. This is reflected in the primary industry focus of Dubai’s UHNW residents, which includes more traditional industries like banking and finance, industrial conglomerates, construction, and manufacturing. While banking and finance are the most common industry focus across all three cities (LA, Monaco & Dubai), Dubai has a significantly larger representation in the latter three industries.

UBS’s latest Global Real Estate Bubble Index released in 2022 reveals that despite a buoyant year, Dubai’s real estate prices remain fair valued, making it an opportune time to continue purchasing real estate in the city. There has been a nominal increase in the prices of housing across 22 of the 25 cities analysed in the report. “Nominal house price growth accelerated to almost 10% on average from mid-2021 to mid-2022, the highest increase since 2007”, according to the report.  The prime market is reporting even stronger growth. The city is still performing 25% below its 2014 peak.

In addition to this, Dubai has received a significant increase in rents as a result of positive growth in demand for housing — driven by a higher influx of expats moving to the city and strong household formation after the pandemic. Disposable income growth has also reportedly now turned positive for the first time since the beginning of the pandemic. Some of the positive changes that have been bolstering the market include new visa requirements as well as proposed new regulations that aim at increasing the transparency of transactions. The city is notably attracting more skilled and wealthy migrants from other regions, where the investment climate has become less favorable. resulting in a positive impact on both the prime owner-occupied properties as well as the rental market.

The report also states that in relation to the Dubai housing market “as oil prices surged, housing prices increased too by 10% between mid- 2021 and mid-2022. The post-pandemic economic recovery and immigration growth supported these dynamics. Rents have even outpaced home price growth over the last four quarters.”

In terms of the rental market, Dubai rents bottomed out last year and have climbed by 22% since mid- 2021. As new tenants settle in, it is expected that they too will eventually become potential buyers, despite rising mortgage rates. House price growth is also reportedly predicted to remain high in the coming quarters, however, the estimated growth rates will gradually decline amid higher financing costs. The report additionally states that “in the long term, with existing oversupply and new construction continuing to outstrip population growth, Dubai’s real estate ride will most likely remain bumpy.”

At LUXHABITAT Sotheby’s, we’ve noticed for the high-end prime market, this still remains to be seen with a clear lack of serviced and ready-to-move-in luxury properties currently.