Structure of the Real Estate Market

Introduction

The real estate market is one of the largest sectors of the global economy. According to Savills, the total value of global real estate exceeds $320 trillion, which is significantly greater than the capitalization of all public stock markets combined. The real estate market differs from the stock market in a number of characteristics: low liquidity, high transaction costs, locality, and informational asymmetry.

Primary and Secondary Market

Primary market — deals with properties that are coming to the market for the first time (new buildings, off-plan projects). In Dubai, the primary market is especially developed — according to DLD (Dubai Land Department), in 2024, off-plan accounted for about 60% of all transactions.

Secondary market — resale of existing properties. In European capitals (London, Berlin, Amsterdam), the secondary market dominates: up to 80–90% of transactions involve already existing inventory.

Market Segments

The real estate market is divided into several major segments:

Residential real estate — apartments, houses, townhouses. Accounts for up to 75% of the entire value of global real estate
Commercial real estate — offices, shopping malls, hotels
Industrial and logistics — warehouses, data centers, production spaces
Land plots — for development, agricultural, recreational

Market Infrastructure

The real estate market operates thanks to well-developed infrastructure:

Information infrastructure: portals (Bayut, Property Finder in UAE; Rightmove, Zoopla in UK; Idealista in Spain), analytical agencies (JLL, CBRE, Knight Frank)
Financial infrastructure: banks, mortgage brokers, insurance companies
Legal infrastructure: notaries, land registries, regulators (RERA in Dubai, Land Registry in UK)
Professional infrastructure: real estate agencies, appraisers (RICS), management companies

Features of the Real Estate Market

Heterogeneity — each property is unique (location, condition, view from windows)
Immobility — a property cannot be moved, which makes the market local
High entry threshold — the need for large capital or a mortgage
Duration of transactions — from 1 to 6 months from offer to deal closure
Government regulation — zoning, building codes, taxes

Market Indicators

Key indicators are used to assess the state of the real estate market:

Demand indicators:

Number of transactions — a direct indicator of market activity. In Dubai, DLD publishes monthly statistics. In UK — HM Land Registry
Volume of mortgage issuance — an indirect indicator of solvent demand
Housing affordability index (Price-to-Income ratio) — ratio of price to annual income. In London >12x, in Dubai 5–8x
Days on market — how many days a property stays listed before sale

Supply indicators:

Volume of new housing delivery — number of new properties put into operation
Construction pipeline — number of issued building permits
Vacancy rate — share of unoccupied properties (for commercial real estate)

Price indicators:

Price indices: Halifax House Price Index (UK), Dubai House Price Index (ValuStrat), Eurostat HICP Housing
Capitalization rate (Cap Rate) — NOI / Property price; reflects expected yield
Rental yield — annual rent / property price. In Dubai 5–8%, in Berlin 2–3%, in London 3–5%

Monitoring these indicators allows developers, investors, and agents to make informed decisions and timely respond to changes in market conditions. Comparing markets shows: Dubai recorded a record 180,000+ transactions in 2024 (DLD), whereas in London the volume of deals amounted to about 100,000 per year — with significantly higher prices. The difference is explained by structural features: a high share of off-plan sales in the UAE, active inflow of foreign capital, and zero capital gains tax.

Principles of Working with Market Data

Professional work in the real estate market is built on the ability to interpret disparate indicators as a unified system. No single indicator gives the full picture: rising prices with simultaneous growth in vacancy rates signal overheating of a segment, while decreasing transactions with stable prices indicate a frozen market without correction. Experienced analysts consider the aggregate of signals: the dynamics of the gap between asking and actual deal price (premium/discount to asking), the absorption speed of new listings (days on market), the ratio of buyers to sellers (buyer-to-seller ratio). In Dubai, professionals also track RERA data on lease contract registration via the Ejari system — these lead price indices by 2–3 months and make it possible to predict the direction of the rental market. In European jurisdictions, central bank data on the dynamics of mortgage lending and overdue debt perform a similar function.

Practical Assignments

Assignment 1. Compare the structure of the real estate market in Dubai and London according to the following parameters: share of primary/secondary market, average days on market, level of transaction costs for the buyer.

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Parameter	Dubai	London
Share of primary market	~60%	~15%
Average days on market	45–60 days	60–90 days
Transaction costs	~6–7% (DLD fee 4% + agent 2%)	~8–12% (Stamp duty 2–12% + agent + solicitor)

Dubai features a higher share of the primary market and relatively low transaction costs. London is a mature secondary market with a high stamp duty.

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Assignment 2. Explain why informational asymmetry is higher in the real estate market than in the stock market, and what tools help reduce it.

<details> <summary>Solution</summary>

On the stock market, prices are formed publicly, company reports are mandatory and standardized. In real estate: each property is unique, deal price data may be closed, the condition of the property requires inspection and expertise. Tools for reduction: open registries (DLD Transaction Data), portals with price history (Zoopla), mandatory appraisal reports (RICS), energy certificates (EPC in UK/EU).

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