The apartment prices in Dubai rose to their highest level in nearly a decade in August, extending a property rally that has turned the city into one of the world's hottest housing markets.
According to AlArabia English News service, the city's housing boom, which has mostly been driven by single-family homes, is now affecting apartments, which make up about 85 percent of the housing supply.
Apartment prices rose 20 percent on average in the year through August, marking the best performance since November 2014, according to real estate adviser CBRE Group Inc. The gains outpaced price increases of 17.3 percent for single-family homes, known locally as villas, according to CBRE.
After a seven-year slump, Dubai's real estate market is rebounding, driven by crypto millionaires and bankers relocating from Asia and wealthy Russians seeking assets to protect. The government has also brought in a slew of reforms, relaxing visa laws and introducing visas for job seekers and freelancers.
As single-family home prices have soared from pandemic lows, apartment prices have recovered more slowly. Average prices for apartments are still 9.6 percent below their peak in 2014, while those for larger houses are 8.7 percent higher, according to CBRE.
ValuStrat, which bases its data on a fixed basket of market-representative properties, said apartment prices increased 10 percent on average in the year to August.
The biggest annual gains were on the man-made island of Palm Jumeirah, where prices surged by a fifth.
The demand for apartments is surging as affordability constricts because they tend to be cheaper in general, according to Taimur Khan, CBRE's head of research. “Also, rental yields in Dubai are considerably higher than what investors can get in London, New York, or Hong Kong.”
The yield for apartments in Dubai — where the currency is pegged to the US dollar and rental income is not taxed — stands at 7.34 percent according to CBRE.
By comparison, the average yield in London is 4.18 percent, and in prime central London — where the overwhelming majority live in apartments — it’s even lower at 3.6 percent.
CBRE reports that the average annual rent for apartments in Dubai is Dh106,674 dirhams ($29,000), and for villas it is Dh322,573.