Brookfield Properties’ new luxury project in Dubai hasn’t been built yet, but a bidding war has already broken out. Wealthy buyers from around the world are competing for apartments in the Solaya beachfront complex, pushing guide prices for the penthouses above $24 million.
The offer is reserved for billionaire buyers who must prove they have the money by presenting a check for one million dirhams ($272,000) just to express their interest, according to promotional material seen by Bloomberg News. Only a selected number of apartments are awarded, while non-selected bidders receive refunds.
The trial, jointly managed by Brookfield and Dubai Holding, offers a rare insight into the inner workings of one of the world’s most active real estate markets.
According to estimates by real estate consultancy Knight Frank, more luxury homes have been sold in Dubai in recent quarters than in any other city, including New York or London. The surge in purchases is reminiscent of the emirate’s pre-2009 boom, which was eventually halted by a sharp recession in the so-called off-plan market, where homes are sold before they are built.
Consumers in London and China have also been affected by investing in properties before they are built, but the crisis in Dubai was severe enough to push the emirate to the brink of bankruptcy. However, that market segment is now behind the broader real estate boom in the Gulf city.
Off-plan transactions account for nearly 70% of all transactions in the emirate, as buyers from Europe, Asia and America flock to buy second homes. According to Knight Frank, the value of luxury homes – typically those costing more than $10 million – has skyrocketed 145% since 2019.
In recent years, the Dubai government has introduced measures to protect buyers, but large investments by international buyers mean any shock to the city’s property market would have repercussions around the world.
Ajay Singh, a real estate agent at La Capitale Real Estate, says he has presented two checks of one million dirhams each in the names of an Emirati and a Spanish bidder for the three-bedroom Solaya apartments, the most expensive of which cost around $12 million. “There is no guarantee that the apartments will be awarded,” he said, adding that money will be returned for unsuccessful bids.
In the years before the 2009 crisis, thousands of buyers in Dubai took out loans and bid on multiple homes to resell, but many were unable to meet payments amid the global credit crisis.
This has left developers with hundreds of unfinished projects and no money to complete them. Thousands of expats have had to flee the city since the crisis, some abandoning luxury cars at the airport.
While the recent rally has begun to prompt warnings from analysts, global buyers are betting on a series of measures introduced by Dubai to protect investors. Now, developers must finance land purchases upfront, while buyers’ payments are held in an escrow account and only released as construction progresses.
Unlike 2009, current demand is driven by end users and those looking for holiday homes, rather than short-term speculators, according to estate agents and developers, suggesting a more stable market.
However, risks remain. A sharp market downturn caused by anything from a global economic downturn to a regional crisis could cause buyers to lose money if some developers are unable to complete their projects. A substantial drop in oil prices in a region that remains dependent on the commodity could also impact confidence.
In a recent report, Swiss investment bank UBS urged caution. “Bubble risk in Dubai has increased since 2022 amid an economic boom, making the market appear increasingly overheated,” the firm’s analysts wrote.
To be sure, the city remains below UBS’s “high” risk category, which includes Miami, Tokyo and Zurich, and the firm has highlighted two potential tradeoffs in Dubai: Rental yields remain high and home values remain well below levels seen in other cities around the world.
This relative cheapness is due to years of decline before the current recovery, and means prices in the emirate are around a third of those in New York and London per square metre, according to Knight Frank.
In the case of luxury real estate, supply continues to lag behind demand, according to Taimur Khan, research director for the Middle East and Africa at real estate firm JLL. In total, third-quarter transactions in luxury homes increased 24% – 103 transactions, with a total value of $2 billion – according to Knight Frank estimates. However, the boom is spurring competition among developers as more companies enter the market. Some of the new arrivals come from other parts of the world and are forced to make large investments to acquire plots of land that have become increasingly expensive.
