Will the crash in crypto and luxury watches affect the Real Estate Market in Dubai?

Market statistics report that the demand for luxury goods is currently fading since Bitcoin has lost approximately 70% of its value since December 2021, and buyers are becoming more cautious.

Financial Times reported that after Shanghai implemented Covid lockdowns earlier this year, prices for some of the most well-known brands of luxury watches and designer handbags (such as Rolex watches and Hermès bags) have fallen between 20% and 50% on the secondary markets. Similarly, In the past two months, China's market for second-hand luxury goods has collapsed as a result of the country's economic unrest, which has limited wealthy people's spending.

Prices for the most sought-after watches on the secondary market, including the Rolex, have now decreased after hitting record highs earlier this year. For instance, as early as March, the Rolex Daytona, the Patek Philippe, and the Piguet Royal Oak, three of the most anticipated timeless pieces were trading for many times their retail value. A few months later, and the market for these goods is at an all-time low. However, the demand for brand new luxury goods, watches, and luxury properties is still very much on a high, especially in the Dubai market. Even if the largest cryptocurrency by market value, Bitcoin, has decreased by over 65% and is slow to recover, investors are still using digital currency to purchase luxury watches and real estate in Dubai.

There is always another side to everything, just like there are ups and downs in every industry.

Dubai Property Market to Remain Stable in the face of the Upcoming Recession

Buyers are operating with caution but are aware that there are minimal risks for their investment when buying real estate in Dubai. Whether they purchase with crypto or not, and in spite of the bitcoin market being still unstable, real estate remains the safest way to increase your wealth.

Dubai is a leading model of real estate market stability and a gateway to endless possibilities. The city has adopted a strong legal framework and legislation to safeguard stakeholders. The city is leading the way globally with a strong projected growth trajectory as a major hub for business and tourism, and exemplary economic fundamentals. No wonder the "crypto-rich" across the world prefer Dubai as a top destination for their investments.

But given that the market for cryptocurrencies as a whole has lost more than $2 trillion in value over the last eight months, how come we are seeing an exponential rise in inquiries and transactions for buying crypto-property? Mostly because Dubai is a safe playground and has gained solid credibility over the past decade. Investors are now drastically reducing cryptocurrencies in favor of other, more reliable investments, and there is nothing more reliable than owning real estate. The real estate market in Dubai is prepared to meet future challenges on a global scale. There will still be an impact, but not to the same extent as in other major global locations. According to experts, the global recession will only have a minor impact on the Dubai real estate market.

The emirate has successfully fought off a significant crisis in the past, and it is capable of doing so once again.

Proactive Strategies

Recent statistics show that as of June, there had been 30,903 transactions on the Dubai real estate market this year. The price of real estate has significantly increased by about 11%. Further analysis reveals that the apartment market has grown by 9.6% while the price of villas grew by over 20%.

Similarly, there has been an increase in demand for premium real estate in Dubai. And it's anticipated that this trend is here to stay, for the near future. Another element that will support the real estate industry and the economy staying more stable is the growth in GDP. According to experts, this is expected to rise by an additional 6% this year, supported by a number of sectors including tourism, hospitality, and real estate.

Why Dubai?

According to the most recent Henley Global Citizens Report, the emirate is attracting the highest number of high net-worth individuals in the world, with 4,000 expected to move to the UAE in 2022, surpassing countries like Australia, Switzerland, the US, or the UK.

For the high- and ultra-high-net-worth crypto investors who are progressively making their way into the real estate market, Dubai seems to be the perfect haven. Investors choose Dubai, driven by an insatiable demand for spectacular returns in both the physical and digital worlds, fueled by the astounding rate of technological developments that are occurring today in the emirate. Similarly, master developers in Dubai are now getting familiar with the impact of cryptocurrencies on the real estate market, many of whom are now facilitating such transactions.

Crypto investors purchase luxury real estate using cryptocurrencies, or they divide the cost between cash payments and crypto transfers. There are over 40 million Bitcoin owners actively looking for methods to diversify their cryptocurrency holdings into more reliable assets. Such investors seek out risk-free, effective, and ideal solutions that are consistent with asset value.

Crypto still Attractive

Given that Dubai is already a leader in the real estate sector, it is not surprising that recent crypto-based transactions and queries regarding property acquisitions have increased despite the market's downward trend.

Consequently, people who are concerned about the negative impacts of inflation or the looming economic crisis will still find cryptocurrency appealing. In particular, Bitcoin is deflationary and censorship-resistant, which is why it is commonly regarded as digital gold and is still attracting much attention.

What is the forecast for Dubai Real Estate?

According to Reuters surveys, prices for real estate in Dubai are most likely to increase over the next two years, mostly fueled by demand from domestic and foreign investors. The market has witnessed impressive year-on-year gains since the Pandemic.

The real estate market in Dubai experienced the strongest quarter in more than a decade, according to data from the Dubai Land Department, with Q1 sales transactions reaching their highest levels since 2020. However, it was predicted that price increases would moderate to 4.5% and 3.0% in 2023 and 2024, respectively, stabilizing the market. Currently, prices in popular neighborhoods including Arabian Ranches, Dubai Hills Estate, or The Meadows have increased by 38.8%, 34.0%, and 33.0%, respectively.

Crypto acceptance in the real estate market will largely depend on factors such as security, governing regulations, and market expansion. The ways in which crypto payments will impact real estate investment processes remain to be seen.