The growth in real estate prices in Dubai may slow down further until2023, according to a real estate consultation.

Residential property values in Dubai are expected to rise more slowly in 2023 after a record year in which more than 60% of units were sold, some of the city's largest real estate consultancies said. Prices are projected to rise by about 5% this year after an 11% increase in 2022, which itself was a slowdown from the 21% growth in 2021, said Richard Weind, group director at Betterhomes.

"Rising interest rates don't eliminate underlying demand, but they certainly have an impact on people's willingness and ability to pay more for real estate," Weind said, although he noted that the market has so far been successful in coping with rising rates and a stronger dollar.

"We obviously have less reliance on interest rates due to the widespread use of cash. In the UK and the US, for example, cash purchases account for 20 to 40% of all transactions. Here, however, it is around 70%," he added.

Dubai's real estate sector grew strongly in 2020 as it reopened after the pandemic ahead of other major cities, with wealthy buyers buying luxury units, propping up a sector that has been weak since oil prices plunged in 2014-15.

Russians were the largest non-resident buyers in 2022, coming in at 15% of transactions, followed by the British with 12%, Indians with 11%, Italians with 7% and the French with 4%, Betterhomes said in a report.

Among Dubai residents, Indians were the biggest buyers, followed by Britons, Russians, Italians and Canadians. Foreigners make up the majority of the population of the United Arab Emirates.

Sales of apartments in volume rose 73% last year, while villas - which led the early recovery in 2020 - increased by just 3% "mainly due to a lack of supply in both the ready-made and under-construction property markets," Betterhomes said in the report.

Problems with oversupply have long plagued the real estate sector, which experienced a bubble in 2009-2010 that more than halved prices.

Last year, 34,000 new units were added, according to Betterhomes. Weind expects 30,000 to 35,000 new units to be added in 2023, which he sees as "a supply shortage in this market given the population growth."