Pivotal time for investors as Dubai's land prices soar amid off-plan boom

Dubai’s real estate market is witnessing a remarkable surge in land and plot prices, driven largely by booming off plan sales. This is creating new opportunities for investors, but they must be alert in order to capitalise.

The off-plan market, which now accounts for approximately 55 per cent of Dubai’s total real estate transactions, has experienced steady growth over the past few years, and currently shows no sign of slowing down.

In the first nine months of this year, off plans sales climbed to Dh179.3 billion, a leap of 42 per cent on the same period in 2023.

The number of off plan transactions also saw a dramatic rise, by 44 per cent to 63,700 transactions, while the average price per square foot rose by 15 per cent to Dh1,600.

“This segment’s expansion has spurred developers to seek out new land opportunities, consequently driving up prices and setting a clear pattern. Land in certain areas remains relatively affordable until these locations gain traction among developers. Once this happens, prices escalate sharply, reflecting the market’s heightened demand. This upward trend in land prices will persist as long as developers can acquire land at rates that allow them to develop and sell off-plan projects profitably,” said Firas Al Msaddi, CEO fäm Properties.

The profitability of these projects is a critical factor in sustaining land demand, thereby ensuring continuous growth in this sector.

Zooming out to the broader landscape, the availability of land in Dubai today is significantly more limited compared to five years ago. This scarcity is particularly pronounced in high-demand areas like Business Bay. “Just a few years ago, 100 plots were available for sale in this prime location. Today, only nine plots are on the market, with prices having doubled, or even tripled, since the pre-Covid period,” Msaddi said.

For larger plots suitable for master community developments, the situation is even more challenging. Private developers find it almost impossible to secure sufficient land for new master community projects.

The surge in land prices isn’t confined to plots for buildings and towers; villa and townhouse plots are also seeing significant appreciation.

Both individual buyers and companies have recognized the lucrative margins in purchasing land, developing villas or townhouses, and subsequently selling them.

This trend has notably contributed to the soaring prices for villa plots in Dubai. For instance, in Jebel Ali Hills, land that previously sold for Dh70 to Dh80 per square foot pre-Covid is now commanding Dh250 to Dh300 per square foot.

As the off-plan market continues its rapid expansion, land prices are poised to rise further. Meanwhile, 2024 is on course to set an all-time high for the number of newly launched projects in a single year.

This surge in new developments could further propel the market, making it a pivotal year for real estate investors. However, they should approach the market with caution, closely monitoring developments, particularly as the off-plan segment reaches unprecedented levels of activity.

Investing in Dubai’s real estate can be highly rewarding, but success hinges on smart decisions. Here are three crucial strategies to protect your investment, according to Msaddi:

• Turn to a real estate expert you feel you can trust after asking them questions and listening to them talk for ten minutes. You need someone who can guide you to opportunities that align with your goals, not just theirs, making them an essential asset.

• Always make a personal inspection of any property before you buy - whether it’s completed, or under construction. This first-hand look will allow you to evaluate the property’s condition, surrounding infrastructure, and future growth potential.

• Get your market intelligence from a reliable source using up-to-date data from the Dubai Land Department. This will ensure you make confident, informed decisions.