Imagine a luxurious villa with its walls coated in gold leaf, having a golden jacuzzi and a huge aquarium in the dining area. Fancy, right? This grand villa in Dubai was recently listed for $204 million. It’s like something straight out of a movie. And it’s just one among many properties that are catching the eyes (and wallets) of the rich and famous.
The Trend
Both Dubai and Riyadh are seeing a surge in their property markets. While many places globally were facing a downturn in their real estate, these two cities showed impressive growth. In plain terms, imagine selling a whopping 45% more houses in Dubai in one year compared to the previous! And not just any houses, but luxury homes that cost upwards of $10 million.
What’s Behind This Boom?
- Dubai:
- Property sales make up a significant chunk (around 8%) of Dubai’s overall income (GDP).
- They’re setting and breaking records in selling luxurious properties. For instance, a penthouse was sold for $112 million in February, and another went for even higher at $114 million just three months later.
- Why? Dubai is attracting wealthy folks, especially from Asia and Russia. So, they’re gearing up to build even more fancy houses. Remember the artificial islands? They’re planning to build more of them!
- Riyadh:
- Riyadh’s surge is more about Saudi Arabia’s long-term plan. They want to rely less on oil and more on other businesses by 2030.
- More Saudis are moving to Riyadh for work. Big companies are also setting up there to get government contracts.
- House prices are on the rise. Imagine a 22% price hike for apartments in just one year! This is due to the government making it easier for people to buy homes. The result? From less than half of the Saudis owning homes in 2017, now 61% do. They’re on track to make it 70% by 2030.
But, Is There A Catch? While everything sounds rosy, some believe this boom might not last long.
- Potential Slowdown: Real estate agents believe property prices in both cities could drop next year. In Riyadh, fewer houses are being sold this year compared to last. And the number of new mortgages? Down by 35%. One reason could be that it’s becoming more expensive to borrow money due to rising interest rates.
- Income Stagnation: While property prices are rising, people’s incomes aren’t. In Saudi, for instance, the average income hasn’t changed much since last year. This means that while houses become more expensive, people aren’t earning more to afford them.
- Dubai’s Underlying Issues: Even though luxury home sales are booming, the rest of Dubai’s property market isn’t doing as well. Many shops remain vacant, and while rents have increased recently, they are still lower than their peak in 2016. Moreover, a lot of those buying luxury properties don’t even live in Dubai full-time, so this boom might not benefit the broader economy in the long run.
Conclusion
While the property markets in Dubai and Riyadh are currently booming, there are potential warning signs that this surge might not last forever. Investors and property buyers should be cautious and make well-informed decisions. The Economist warns, “This fits a broader boom-time feeling in a Gulf buoyed by high oil prices. But brokers think prices in both cities will fall next year. The Saudi market is already slowing. Some 70,000 homes were sold in the first half of this year, down from 103,000 last year. New mortgages fell by 35%.”