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Oversupply has held down house prices in the city, but this year is expected to see the lowest number of completions since 2012

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Residential property transactions in Dubai reached their highest level since 2013 in the six months to June as people sought larger homes, supporting prices in a market that has been plagued by oversupply for years, Bloomberg reports.

Average home prices rose 2.8 percent in the six months through June, according to data from consultancy CBRE. “With strong demand supporting the market, we are seeing price performance improving significantly,” said Taimur Khan, head of research at CBRE. However, the growth is from a low base compared to June 2020 prices when the world had to deal with blockades.

Transaction volume grew in the first half of the year by 69.2% and 46.4% compared to the same periods in 2020 and 2019, respectively, according to CBRE data. The luxury segment of Dubai’s residential market, comprising mostly single-family homes, is seeing demand growth and is a major contributor to the rise in average prices.

The housing market is enjoying a continued boom across the globe, with prices rising at their fastest rate since 2006, according to data from consultancy Knight Frank. House prices are growing at double-digit annual rates. Earlier this year, HSBC Holdings said rising demand for larger homes during the pandemic would further support Dubai’s property market, in line with Morgan Stanley analysts expecting strong price growth to persist for “several years”.

In Dubai, chronic oversupply has held back price growth somewhat, but this year is expected to see the lowest number of completions since 2012. since. Since the start of 2021, 18,616 homes have been built and another 37,466 are expected to be finalised by the end of the year, below initial forecasts of 83k, CBRE data shows.

“No price rises are expected in the city and affordability remains an issue. Due to oversupply, prices in the city will remain at their current level, we will have to wait a while before prices start rising across Dubai,” Khan said.

In the meantime, rental prices continue to decline with a 5.9% drop in the year to June 2021. This shows the challenges facing the market as a whole. Apartments are the biggest drag with rents falling by an average of 8.1% amid continued oversupply. Over the same 12-month period, villa rents rose by 10.1%.

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