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Anyone with an eye on the real estate market in Dubai over the last few years could not fail to notice its pace of development, and I don’t just mean from a physical development perspective but from the point of view of regulatory changes and the impact of economic influencers.
It has certainly been an interesting period as we have seen the market continue to mature, adjust and react to domestic as well as external global factors.
Looking back, property sales values and transactions have declined over the past 18 months since the government introduced the necessary cooling measures to reverse sales prices from overheating following the announcement of Dubai’s successful bid to host the Expo 2020 as well as due to general concern regarding the uncertain economic outlook exacerbated by continued low oil prices.
With substantial supply due to be handed over in the emirate throughout this year, both sales prices and rental rates in the city are expected to come under increasing pressure in the coming months.
This will invariably be affected by the addition of over 20,000 apartments and more than 7,000 villas which are due to be handed over this year.
Nevertheless, the real estate sector in Dubai continues to offer attractive returns to investors who are looking at the long term, especially when compared with other global cities.
The trend of falling prices in the emirate began in 2015 and year on year, figures have shown a decline in apartment sales prices of 8 per cent and villas by 11 per cent.
This is expected to continue this year, albeit at a more moderate pace as rates in several developments have already declined sufficiently to encourage the conclusion of transactions.
Last year’s price softening has been welcomed by prospective investors eager to get a foot in the door or add to their existing portfolios.
It has also allowed the market to catch its breath and regain investor confidence in its long-term prospects and value offerings when compared to other global property hotspots.
Dubai’s rental yields are currently averaging just over 7 per cent, which is extremely attractive when compared with cities such as Hong Kong, which offers just 2 to 3 per cent, and London at 3 to 4 per cent.
In some parts of Dubai, where well-established and luxury developments characterised by splendid views, excellent facilities and good transportation networks are located, the yield can be much higher.
For example, it can be as high as 10 per cent for prestigious developments on Palm Jumeirah, with hotel-managed apartment units at DUKES Dubai and Anantara developments, representing sound investment potential.
While we have seen a cooling of sales prices, the rental market has remained broadly robust, thus contributing to a climate of solid yields for rental properties in select areas.
The reality is that residents still need somewhere to live.
When coupled with the forecasted increase in local population as we edge closer to 2020, with more people coming in as the Expo build-up continues, this means that renting remains the first choice for the majority of newly arrived residents and some visitors in the emirate.
There are several motivated and serious sellers in the marketplace, especially in the case of vacant land and bulk inventory, which presents an opportune time to buy.
Knowing when to purchase a property will become a major factor but all signs point to this year being a good time to invest in the UAE property market.
Thus, short and long-term investors will be assured of a range of options when it comes to buying their next property.
Source: John Stevens, Special to Properties
Managing Director, Asteco