Smaller apartments of great demand in Dubai

27.09.2015
Price per square foot in Dubai is actually higher for the smaller units than for three plus bedroom apartments.

Dubai real estate market experts have revealed an interesting pattern that is characteristic only for Dubai in contrast to other mature property markets in the world. The smaller is the apartment in Dubai, the more it will cost per square foot.

However, this trend began to change recently. And it’s time to take advantage of it, experts say. In mature real estate markets pricing per square foot typically rises in proportion to the unit size. Therefore demand for larger spaces has been traditionally forming the dynamics of prices in such cities and locations like San Francisco, London, Singapore and Manhattan in the last decade.

In Dubai, everything was different. For many years Dubai, populated mostly by expatriates, was considered a kind of a transit point for its residents, so the demand for rentals has usually driven real estate market. Investors, who wanted to buy the smallest apartments in a popular Downtown area, have dominated the asset purchases in the real estate space, because small apartments are of the highest demand among tenants. Accordingly, the cost of a square foot in Dubai has been inversely proportional to the total area of the property.

Developers have grasped this basic market trend in Dubai and met the requirements of the time by offering an increasing number of smaller units in newly announced developments. Only less than 25 per cent of new offerings were for two- and three-bedrooms, while in a more developed foreign markets this figure is usually over 70 per cent.

However, the situation is changing, and the real end buyer comes in the forefront of Dubai real estate market. The “wealth effect” is playing itself out in Dubai, and residents’ priorities shift: now the majority is considering the emirate their second or even the first home. Accordingly, the demand for spacious, comfortable, but affordable housing is growing. And it is typical for the rental market too. Now larger sized three plus bedroom apartments are actually trading at a premium to the smaller-sized ones on a per square foot basis in such Dubai areas like Greens and even Downtown. Rentals for large apartments in Dubai's Bur Dubai, Deira, Satwa and Ghusais, are also going up. Therefore, experts advise to consider this trend when thinking of allocating new investments in Dubai real estate.

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