UAE Tops Global Property Price Surge in 2023: IMF

Property prices in the UAE have experienced the highest increase globally in 2023, as reported by the International Monetary Fund (IMF). The UAE also ranks among the top 10 countries with the largest property price surge since the pre-pandemic era. According to Bank for International Settlements data, the UAE witnessed a 10.4% increase in prices in 2023 and a substantial 14.15% surge since the pre-pandemic period, securing the 6th position in terms of growth since that time.

The remarkable rise in property prices over the past two years is attributed to an influx of foreign workers and strong demand from high-net-worth individuals. Industry experts highlight double-digit rate increases, emphasizing the impact of these factors on pushing prices to record highs. Moreover, the residential property market’s supply has struggled to keep pace with population growth, resulting in an undersupply of luxury and ultra-luxury units in prime locations.

In Dubai, per-square-foot prices reached a record high of Dh1,271 in November 2023, surpassing the previous peak in September 2014. The undersupply of units coupled with increased demand has particularly affected the luxury segment, driving up prices for villas and penthouses.

The IMF notes that home prices in advanced economies, including many European Union countries, Africa, and the Middle East, are currently 10% to 25% higher than pre-pandemic levels. Rising interest rates have affected residential mortgage markets, impacting affordability for buyers. Scarce home supply in some regions further complicates the situation, resulting in stretched housing affordability amid elevated home prices and higher interest rates.

In the first half of 2023, mortgage rates in advanced economies rose by over 2 percentage points compared to the previous year. Countries like Australia, Canada, and New Zealand witnessed significant declines in real house prices during this period, potentially due to a high share of adjustable-rate mortgages and previously elevated home prices. While some advanced economies experienced a more than 15% drop in home prices, the decline in emerging economies was less pronounced. Overall, real house prices are expected to continue cooling from the highs of 2021 and 2022 to reach pre-pandemic levels.