Last year became a phenomenon for the global real estate market, when neither high inflation nor fluctuations in interest rates coupled with geopolitical news could stop its development. Experts, unanimously, agree that 2024, on the contrary, will bring a wave of transformations and fundamentally change the situation for those who will be able to catch the wave.
Spoiler: Real Estate, especially its residential segment, will continue to evolve and remain an example of significant stability, albeit with its own peculiarities.
$365.51 trillion
estimate of the global real estate market in 2023
3.4%
average market growth estimate compared to the previous year
The real estate market in the UAE is in a unique position: a boom in foreign investments in collaboration with government initiatives, from golden visas to economic incentives, creates a special investment climate. On the one hand, there are local peculiarities, on the other hand - the influence of global consumption trends and digitization. In this sense, the market of the Emirates is a fertile ground for examples and illustrative references.
The Evometa team has studied dozens of trend reports to formulate 5 non-obvious trends.
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What to expect to stay ahead of the changes?
- Millennials and Generation Z are digitizing the game.
- Digital Twins technology: a key trend in PropTech
- An increase in digital innovations
- The future of AI in real estate
- Buyers are willing to pay for the promise of a home: off-plan* sales to become more aggressive
- Lower capitalization rates (Cap rate), but more income. Prospects for growth and stability
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Millennials and Generation Z are digitizing the game
Not just a trend, but a fact: Millennials and Generation Z are currently the most active and decisive when it comes to real estate purchases. Their desire for comfort, including digital one, is transforming into real demands for the market to be technologically advanced and modern.
As potential consumers, they value digital opportunities: from initial acquaintance with the property to the ability to complete transactions online. Due to the pandemic and the competitive housing market in 2020, some buyers were purchasing their homes without even stepping foot inside prior to the transaction. In 2024, these user behavior traits will only intensify the trend towards digitalization of the real estate market, globally.
As potential consumers, they value digital opportunities: from initial acquaintance with the property to the ability to complete transactions online. Due to the pandemic and the competitive housing market in 2020, some buyers were purchasing their homes without even stepping foot inside prior to the transaction. In 2024, these user behavior traits will only intensify the trend towards digitalization of the real estate market, globally.
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Digital Twins technology: a key trend in PropTech
Essentially, it boils down to creating a virtual counterpart of a real object, process, or system. Virtual tours and modeling with Digital Twins will become the standard for viewing properties by future residents.
Imagine having the ability to showcase a 3D digital model of each property during a housing presentation. Or predicting significant environmental parameters that a specific real estate property can withstand. Digital twins will be useful during construction: for example, insurance and maintenance organizations can quickly assess the current condition of properties, and developers can evaluate the safety and reliability of future properties.
Imagine having the ability to showcase a 3D digital model of each property during a housing presentation. Or predicting significant environmental parameters that a specific real estate property can withstand. Digital twins will be useful during construction: for example, insurance and maintenance organizations can quickly assess the current condition of properties, and developers can evaluate the safety and reliability of future properties.
Property viewing is not the only aspect of purchasing property that is becoming digital. Now you can get a mortgage online. Millennials are increasingly turning to technology to learn more about their new neighborhoods. This has made sites like Nextdoor popular, allowing residents of specific areas to stay connected with each other.
PropTech — short for "property" and "technology". PropTech is an area that brings together technologies in the real estate sector. PropTech solutions focus on changing the consumption model: buying, selling, renting, managing real estate using data and process automation.
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An increase in digital innovations
While technologies like Digital Twins and virtual tours are becoming the standard for property viewing among millennials, the use of digital currencies is already a given for transactions in the real estate market.
The times when purchasing required tons of paper documents are gradually becoming a thing of the past. They are being replaced by digital online processes. For example, Dubai has for the first time allowed the use of digital currencies for real estate purchases. This simplifies international transactions, making property purchases efficient and cost-effective.
In 2024, we will see not only an expansion of the geography where cryptocurrency payment is possible but also the implementation of new technologies to improve the user experience, from property presentation to closing the deal.
The times when purchasing required tons of paper documents are gradually becoming a thing of the past. They are being replaced by digital online processes. For example, Dubai has for the first time allowed the use of digital currencies for real estate purchases. This simplifies international transactions, making property purchases efficient and cost-effective.
In 2024, we will see not only an expansion of the geography where cryptocurrency payment is possible but also the implementation of new technologies to improve the user experience, from property presentation to closing the deal.
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The future of AI in real estate
Despite its prospects and constant presence in the news, artificial intelligence (AI) remains largely unfamiliar to leaders in the real estate industry.
Many of the capabilities and functionality of artificial intelligence are still poorly understood by executives. The reasons are misinformation and lack of understanding.
Developers are clearly concerned about issues of privacy and data security, especially for systems using big data. This year, the discussion of how to integrate AI into real estate on a global scale will continue, but significant success in internal AI integration into the industry should not be expected just yet.
However, the situation is quite different when it comes to AI assistance in the process of property search and analysis. Primarily for investors, the methods of analyzing potential investment opportunities are changing, and the chances of detecting fraud in real estate transactions are increasing.
Many of the capabilities and functionality of artificial intelligence are still poorly understood by executives. The reasons are misinformation and lack of understanding.
Developers are clearly concerned about issues of privacy and data security, especially for systems using big data. This year, the discussion of how to integrate AI into real estate on a global scale will continue, but significant success in internal AI integration into the industry should not be expected just yet.
However, the situation is quite different when it comes to AI assistance in the process of property search and analysis. Primarily for investors, the methods of analyzing potential investment opportunities are changing, and the chances of detecting fraud in real estate transactions are increasing.
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Buyers are willing to pay for the promise of a home: off-plan* sales to become more aggressive
Properties under construction are gaining more attention which is confirmed by the stable trend: people are willing to pay more not for the actual property but for the promise of a future home.
Naturally, with the increase in the number of foreign and local property buyers by 40-60%, the off-plan market in the Emirates has experienced a boom.
Among the factors that have shaped this investment pattern are government efforts: providing investors with long-term visas (up to 10 years), citizenship, ‘golden visas’ to foreigners, reducing fees and taxes on real estate transactions, simplifying lending rules, as well as launching mega-projects like MBR City or Dubai Creek Harbour (DCH). Collectively, these measures have helped the off-plan market establish its reputation in the local market: attractive, affordable, and safe for property purchases.
Interestingly, many projects launched in previous years in the UAE will be completed this year. As a result, a significant influx of new residents and a wave of resale investments in under-construction properties can be expected.
Driven Properties*, meanwhile, emphasizes that in 2024, only 24,000 residential units are planned to be delivered. This is half the number of units delivered in 2023, while demand continues to grow rapidly, and the supply is diminishing.
Naturally, with the increase in the number of foreign and local property buyers by 40-60%, the off-plan market in the Emirates has experienced a boom.
Among the factors that have shaped this investment pattern are government efforts: providing investors with long-term visas (up to 10 years), citizenship, ‘golden visas’ to foreigners, reducing fees and taxes on real estate transactions, simplifying lending rules, as well as launching mega-projects like MBR City or Dubai Creek Harbour (DCH). Collectively, these measures have helped the off-plan market establish its reputation in the local market: attractive, affordable, and safe for property purchases.
Interestingly, many projects launched in previous years in the UAE will be completed this year. As a result, a significant influx of new residents and a wave of resale investments in under-construction properties can be expected.
Driven Properties*, meanwhile, emphasizes that in 2024, only 24,000 residential units are planned to be delivered. This is half the number of units delivered in 2023, while demand continues to grow rapidly, and the supply is diminishing.
*off-plan — purchasing property at the development or pre-construction stage
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Should market stabilization be expected in such conditions?
According to data from the Dubai Land Department, in the third quarter of 2023, 37% of properties were under construction, while the remaining 63% of transactions were conducted in the secondary market.
As demand for off-plan projects, including premium ones, continues to grow, developers are revising their strategies. To meet the evolving needs of investors and buyers, they are focusing on luxury real estate. This, by default, leads to price growth above market expectations. Developers, seeing the market dynamics, are becoming more aggressive in pricing their off-plan properties.
Buyers are not deterred by higher prices, down payments of 20-30%, and the timelines these projects are tied to during the construction phase. This means that prices, as well as the speed of response to new launches (lots in Palm Jebel Ali and DIFC Living were sold out within minutes), will continue to surprise us in 2024.
On the other hand, if developers continue to launch new projects at an accelerated pace and secondary properties enter the market simultaneously, this will create additional supply and help keep prices within reasonable limits. One thing is certain: relief will come for renters, especially by the end of 2024 with the emergence of more new homes.
As demand for off-plan projects, including premium ones, continues to grow, developers are revising their strategies. To meet the evolving needs of investors and buyers, they are focusing on luxury real estate. This, by default, leads to price growth above market expectations. Developers, seeing the market dynamics, are becoming more aggressive in pricing their off-plan properties.
Buyers are not deterred by higher prices, down payments of 20-30%, and the timelines these projects are tied to during the construction phase. This means that prices, as well as the speed of response to new launches (lots in Palm Jebel Ali and DIFC Living were sold out within minutes), will continue to surprise us in 2024.
On the other hand, if developers continue to launch new projects at an accelerated pace and secondary properties enter the market simultaneously, this will create additional supply and help keep prices within reasonable limits. One thing is certain: relief will come for renters, especially by the end of 2024 with the emergence of more new homes.
*Real Estate Agency in Dubai