As a professional working in Dubai real estate, the price correction is almost always the ‘elephant in the room’ for me. I find myself talking to friends and family about work when suddenly they get uncomfortable while asking me about mine. “It’s great,” I tell them “In fact, one of the best times in my career.”
Evidently enough, the elephant doesn’t bother my family only, it’s the market sentiment. Well, let’s address it then.
Let’s start by stating some facts, the prices have been constantly correcting since early 2014. The Gurus of the market predicted 2018 to be the end of this trend. They weren’t completely wrong. Even when the volume of transactions is not nearly as good as last year, the prices have held up really well in most communities. While some of them including Dubai Sports City, JLT, etc. even experienced a slight increase in the asking price.
But what makes us so sure that this is the end of the line? That this upward trend is going to hold?
To answer that question we need to first understand what happened in 2014 to cause this fall in the first place.
Hype factor: In its initial stage, the real estate market in Dubai was guided by hype more than the forces of demand and supply. This was the time when you’d read an advertisement say “Buy a villa in Dubai and stand a chance to win a private jet” and you’d not spend a second thinking about the outrageous claim.
Central Bank Mortgage Cap: In order to control the price hike resulting from such hype, the Central Bank issued a cap on mortgages in October 2013. This meant anyone who wanted to buy a property had to save at least 30% of the property value (25% down payment + registration and transfer charges).
Oil Prices: By the end of 2014, oil prices went as low as $47 a barrel. Every economy connected to oil suffered a hit. UAE being one of the biggest oil producers, couldn’t stay away from the effects of this drop.
A price correction initiated by these factors was taken further by the Russian currency crisis in early 2015, Brexit in 2016 and limitation on crude output enforced by OPEC in late 2016.
By the time Dubai could recover from these hits, it was already the Elephant in the Room. Everyone made assumptions and no one wanted to talk about it.
So what’s different now? What is contributing to the upward trend?
Subpar Rates: Today one can buy property with the same number of zeroes on the cheque as 2013. Now compare this to the inflation on every other commodity. You will realize that the current prices are subpar. This means that properties are now accessible to a larger chunk of the population thereby supplementing the demand.
Government Efforts: Demand in the real estate field is highly affected by government policies. A strong demand is fueled by a population that is committed to the country. Earlier this year, the government announced that by the end of 2018, it would start giving 10-year residential visas to professionals investing in Dubai. This is a part of the government’s effort to retain the population and inspire confidence for them to invest in the market.
Awareness: Developers and brokers have learned from every crisis that has hit the market before today. They are now quick to respond to market demand. The new trend of affordability in the Dubai market is a perfect example of this awareness among the professionals.
Expo 2020: 300,000 new jobs are expected to come out of the Expo. This, when compared to the total population, seems to be a huge amount. A total of Dh56.6 billion was allocated to infrastructure development for the Expo by the Government in 2018 alone. Consider any country, growth in infrastructure and population always has always led to a growth in real estate demand.
So yes, this is a hard time for the market. But it is also the most appropriate time to listen to your gut and make a move. Three years from now, you’ll be glad that you decided to go fishing when everyone was too afraid to enter the water.