The city is one of the world’s most affordable luxury residential markets, according to Knight Frank. US$1 million can fetch a 226 sq ft flat in Hong Kong, or a 1,130 sq ft home in Dubai, according to the real estate consultancy.

But it remains to be seen how much longer Dubai can hold on to that title, as the city’s property market is picking up momentum. Home prices in Dubai increased by 5.6 per cent in the first quarter, climbing for a ninth consecutive quarter, Knight Frank’s data showed. Luxury homes in particular surged 44 per cent last year, the highest globally, compared with the 1.3 per cent decline in Hong Kong.

With only 289 homes in Dubai’s prime districts expected to be delivered by 2025, Knight Frank expects the “clear demand-supply imbalance” to further push up prices by another 13.5 per cent this year.

The growth has prompted expatriates like Mrs Lau and her husband, who moved to Dubai from Hong Kong eight months ago, to buy a town house after renting for four months.

Mrs Lau, who did not want to use her first name, was keenly aware of the skyrocketing rents in Dubai, which rose 25.8 per cent in the first four months this year, data from CBRE showed. “If rents and prices keep rising, buying a home here for our own use is not a bad thing,” she said.

She is not alone. “Many new arrivals start looking for homes to buy within the first two months because they see how prices are surging,” said Stephanie Yim, an agent at Bemine Properties in Dubai.

The influx of ultra-wealthy investors has boosted transaction volumes. Last year, the city emerged as the world’s fourth most active market for luxury home sales, with 219 homes worth over US$10 million sold for a total of US$3.8 billion, trailing behind New York, Los Angeles, and London, according to Knight Frank.

In the first quarter of this year, 88 such homes were sold for over US$1.63 billion thanks to strong demand from ultra-high net worth individuals – those with a net worth of US$30 million or more. Average transaction prices rose 16 per cent.

For the whole year, Knight Frank predicts US$2.5 billion to flow into Dubai’s real estate from individuals with a net worth of over US$3 million.

Knight Frank said a large part will be coming from China, Hong Kong and Singapore, as its survey found that 90 per cent of this group is interested in buying this year.

“Clearly there is an element of revenge spending mixed in there as we saw elsewhere in the world when the Covid restrictions were scaled back,” said Faisal Durrani, partner and head of Middle East Research at Knight Frank. “We’re likely to see that from locations such as China, in particular.”

Since the start of the year, real estate consultancy Juwai IQI has been fielding growing inquiries about homes in the UAE from mainland Chinese buyers. The Gulf nation climbed three places to rank as the sixth most popular destination, its highest ever, according to Juwai.

The interest from Asia’s wealthy has prompted Dubai-based agencies to tap buyers from the region. Huaxia Real Estate hosted presentations in Malaysia and Singapore last week and organised tours in Dubai, while D&B Properties set up a China-focused team in May.

But Dubai’s property market is not without risk. It has been on a roller-coaster ride over the past two decades and is highly correlated to oil prices, UBS said in its report on the global real estate bubble index in October.

The Swiss bank said Dubai’s home price growth is likely to remain high in the coming quarters thanks to looser residence requirements, but growth will gradually recede amid higher financing costs.

“In the long term, with existing oversupply and new construction continuing to outstrip population growth, Dubai’s real estate ride will most likely remain bumpy,” it said.

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Dubai is also vulnerable to global macroeconomic conditions, Knight Frank warned.

Its survey found that while global investors were keen, they are concerned about rising inflation, economic slowdown, oversupply and conflict in eastern Europe.

Azar Zaidi, a Post editor who relocated to Dubai in February, is on the lookout for a house but said he “will wait until things calm down a bit”.

“It seems that the market is super hot right now, and we don’t want to overpay,” he said.