16 November, 2007
Here's an interesting excerpt from an article by Ryan Mahoney of The Gulf News, published today.
If I had a dirham for every time I was asked what is going to happen to property prices in this market I would have built up a tidy sum by now! The truth of the matter is that nobody has the definitive answer, we can debate for hours on end and come up with a likely scenario, but without a crystal ball it's tricky. It is possible however, to look to other similar markets and consider the natural cycle of real estate for guidance so for what its worth, here are my thoughts on one of the most frequently asked questions in Dubai.
There are many factors that affect the price of property but the biggest single factor that has influenced the Dubai market over recent times has been supply and demand. At a time when the majority of units are still under construction, we have seen an incredible level of demand for all types of properties; from apartments to villas and warehouses to office towers.
When the freehold property law was introduced, the Dubai property boom was born. Attractive launch prices along with unique and aspirational projects such as The Palm Jumeirah and The World made Dubai an investor's paradise. Speculators looked for quick returns by capitalising on an untapped market, expatriates bought somewhere to live and holidaymakers looked to these shores for a second home.
Ever since, demand has continued to increase, pushing prices up with it, providing investors with fantastic returns, both in terms of capital growth and leasing revenue. Such increases have spurred more people to buy here, creating further demand and driving prices up.
The massive influx of people, driven by Dubai's positioning as a major business hub for the region and a luxury holiday destination, has created an insatiable demand for property. All new residents need a place to stay and in the same way, multinationals need business premises. The pace of growth means there hasn't been enough property to go around and therefore, any completed property available for sale or lease has been at a premium rate.
The second biggest factor affecting the supply shortfall, and therefore prices, is delivery delays. In many cases, construction has taken far longer than was ever expected, adding further pressure to an already strained market.
So getting back to where I started; what does the future hold? Dubai is currently a hive of construction activity and as each development reaches completion, more products become available. However, as these projects are delivered, there will, of course, be more and more people relocating to Dubai for work, the number of which will affect how long it takes for supply to even out. The nature of real estate suggests that at this point we could see a levelling of prices.
Ultimately though, I don't see anything drastic happening to prices. Dubai still has a lot to offer buyers. With increased regulations adding further credibility to the market, and the current strength of some foreign currencies making Dubai property more affordable, as well as some exciting new projects underway, demand should remain a firm favourite with buyers for some time to come.
Here's an interesting excerpt from an article by Ryan Mahoney of The Gulf News, published today.
