Demand for apartments is now outpacing villas; here's why

Dubai apartment demand

Amid shifting trends in Dubai's real estate market, the demand for apartments is now surpassing that of villas and townhouses. This change reflects the evolving preferences of residents and investors, driven by factors such as population growth and infrastructure developments.

In the wake of the Covid-19 pandemic, there was a surge in the sale of villas and townhouses as people sought larger living spaces due to travel restrictions and the need for more outdoor activities. However, with the gradual return to normalcy and an influx of professionals moving to Dubai, the demand for apartments has surged.

The increasing population in Dubai has led to a continuous imbalance between supply and demand in the apartment sector. In 2023, while the population increased by nearly 100,000, only around 50,000 residential units were introduced to the market. Similarly, in the first quarter of 2024, approximately 25,700 new residents entered the emirate, compared to just 6,500 new units.

Recent data indicates a significant shift in buyer and tenant preferences, with nearly 58% of property buyers and 79% of tenants searching for apartments in April. This contrasts with previous months, where villas and townhouses garnered more interest. Industry experts attribute this trend to the evolving needs of homebuyers and tenants, as well as strategic developments in the city.

Cherif Sleiman, chief revenue officer at Property Finder, highlights the dynamic nature of the real estate market and emphasizes the impact of key announcements such as the shift of operations from Dubai International Airport to Al Maktoum International Airport. This move is expected to stimulate demand in developing areas and drive renewed interest in apartment living.

Furthermore, industry executives anticipate higher demand for both apartments and villas in emerging areas such as Dubai South, Jumeirah Village Circle (JVC), and Dubailand. The expansion of Dubai Metro's Blue Line and the relocation of airport operations are key factors driving this demand. Off-plan units in these areas are particularly attractive to investors due to the potential for higher returns.

The surge in off-plan transactions underscores investor confidence in Dubai's real estate market. Property Finder reports a significant year-on-year increase in both volume and value of off-plan transactions, indicating sustained interest and investment activity in the sector.

John Lyons, managing director at Espace Real Estate, notes the growing trend of tenants transitioning to homeownership, driven by high rental prices and favorable mortgage conditions. With mortgage products becoming more affordable and relaxed visa regulations, many residents are opting to buy their own homes rather than renewing rental contracts.

Overall, the shifting demand dynamics in Dubai's real estate market reflect broader trends in urban living preferences, population growth, and infrastructure development. As the city continues to evolve, stakeholders anticipate further opportunities and challenges in meeting the diverse housing needs of residents and investors alike.