Expert Eye: Expectations of Dubai realty market in 2016

Expert EyeRanjeet Chavan

The year 2015 has been somewhat stable for Dubai real estate market with not much of a price fluctuation, except for some areas that witnessed correction on price levels. Overall, 2015 has been stable for the realty market, but it has become a lot more mature and the investors are now more well informed about the market. This market holds a lot of potential, and the fundamentals are getting stronger.

The market is moving forward to achieve a very lucrative standpoint in the year 2016. It went through a healthy correction phase, which we believe was an important phase to create a mature market. The first half of 2016 should be similar to the pattern seen in 2015; and we believe that the last two quarters should see a higher demand for the real estate market. This is based on the fact that a lot of infrastructure developments are ongoing in Dubai, especially the works related to the World Expo 2020. Developments for the Expo would start taking shape by around this time.

Helping the overall growth of the market, investors are in a position to take a well-informed decision on buying or where to invest their money. This is the reason for quality projects achieving higher sales. Basically, the best product wins at the end, so a developer with a good location, quality project combined with reasonable price point and innovative payment plan is a winner.

With developers coming with attractive payment plans, the options for investors are being opened up further, helping some very good deals in the market. Demand for ready properties will be driven by the end-users, for whom it is a very good time to enter and convert their rents, which is on an upward trend generally, into equity in the real estate. The investors, at the same time, will be able to enjoy a higher ROI than the previous years.

The market is slowly shifting towards end-users with more tenants turning into first-time home owners because of the low interest rates and correction in prices. Investors can also expect a higher investment yield since the sale prices have dropped more than rental prices, positively impacting the yield. The demand in Dubai realty market is all about the right location such as Downtown Dubai, Business Bay region, MBR City and more.

With infrastructure completed 100 per cent and almost all community developments being operational, the occupancy levels here are above 90 per cent and to find a vacant unit has become almost impossible, with the rental levels on an upward trend on a yearly basis. This, coupled with a good price point and solid developer credentials, would drive the market in the next few years.

The ratio of investors putting their money is evenly poised between ready and off-plan projects. Ready properties ensure annual returns of up to seven to eight per cent, while off-plan properties come with the benefit of staggered payment options. Depending on the buyers’ perception and requirement, both options are currently being explored by the investors.

Statistics show that the new supply of ready units is under pressure and not able to match both the demand and the overall economic growth of the country. With the government investing in large format infra-developments, the anticipated growth of the tourism sector, more new companies looking to make Dubai their base for the GCC and African regions, the demand is only poised to increase in the coming five years.

For real estate investors, 2016 would be ideal to buy properties in Dubai considering the lower price points, higher rental yields and lower mortgage rates that are on offer. The anticipation is that from the year 2017, prices will start to rise at a stable pace.

Source: Ranjeet Chavan, Special to Freehold
Director - SPF Realty


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