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The past two years saw Dubai’s real estate sector grow at an alarming speed, prompting analysts to raise the red flag and issue warnings of a potential bubble. This year, things have changed significantly — price growth is back to more manageable levels and the real estate environment is seeing a positive makeover with end users finding their way back to the market.
“From the rental model, more professionals are looking to own homes, and this is good for the real estate market,” Efthymios Progiopoulos, Manager of Valuations and Research at Hamptons International, tells PW.
Progiopoulos believes genuine homeowners are now gaining a bigger share of the market, a shift that underlines the positive outlook of the property sector and reaffirms its strong fundamentals.
* Are the indicators of the first two months in line with your projections for Dubai’s property market this year?
There is certainly an upward trend both in the number of inquiries and transactions in the first two months of the year. For a real trend of the market, we will have to wait for the quarter results.
However, overall, there is positivity and confidence in the market. While you might not see the long queues and big rush, demand is steady and, more importantly, it is real. What we see today is an increasing number of end-use homeowners who are looking to buy property at attractive prices.
* What are the factors driving investor confidence in the sector?
There are various factors that influence property demand, including location, market stability and higher disposable incomes. The overall driver, however, is the return on investment. Dubai’s property sector offers some of the highest returns in the world, outperforming any other asset class.
Additionally, along with a growing population and its status as a financial, educational, leisure and business hub, Dubai’s property sector also benefits from its appeal as one of the world’s top tourist destinations. This has particularly worked well for serviced residences.
The emirate’s biggest plus is that the government is proactive when dealing with any concern that may potentially hinder the growth of the market.
* Can you talk about how Dubai’s property market is maturing?
The lessons of the past have made everyone a little wiser. Buyers are now looking at actual returns and steering away from get-rich-quick schemes.
Traditionally, end users in Dubai are families who want to remain here for the long term. We see more of these serious buyers today. They are interested in good value, functionality and quality of construction in well-developed communities. Their focus as investors is shifting from short to medium and long term, which means switching from a rental model to owned homes.
* Will the decline in oil prices have a negative impact on the sector?
We do not foresee a major impact this year as all the GCC countries have retained a high level of public spending, which translates into more jobs and stability, along with growth in infrastructure and higher disposable incomes that encourage investments, including in property.
* Do you see strong interest from foreign investors?
Yes, of course. Dubai’s safe investment status brings great interest from traditional Asian (India and Pakistan) and British markets, as well as from other GCC countries, China and Singapore.
* Ultra-high-net-worth individuals are reportedly seeking new investment havens following the crisis in Russia and the cooling of the Chinese economy. Will this positively impact Dubai’s realty sector?
Yes. These investors are looking for returns as well as safety from currency fluctuations. We can expect a positive effect on high-end residential properties as Dubai’s real estate sector has a history of good returns on investment. Also, the dirham’s peg to the US dollar insulates investors from currency-fluctuation challenges.
* Are rents stablising in areas such as Downtown Dubai, Palm Jumeirah and Dubai Marina?
We can expect rental stabilisation in major established developments, with new ones coming on line, as well as the trend of middle-income families relocating to more affordable properties.
* What is the potential for middle-income housing?
If you study market trends, you can see that annual rent for an average two-bedroom apartment last year was around Dh120,000. This implies that households making less than Dh20,000 a month cannot afford an apartment in Dubai as they would be spending more than 50 per cent of their income on rent. A shift towards mid-income homes, where people can own them at affordable rates, is a real market need and a great opportunity for developers. We see positive signs in this regard already. Nshama recently launched three-bedroom town houses at prices starting from less than Dh1 million.
* What is the trend in the secondary market? Which areas are in demand?
The secondary market in general seems to be stabilising as well and will probably continue to do so as there is a significant influx of new units expected this year and even more next year. The highest demand is for communities that are well established such as Downtown Dubai.
* Has the Dubai Tram benefited the real estate sector, similar to the impact of the Metro?
It has only recently been introduced and it takes time for people to change lifestyle habits. But with time and its expansion, its usefulness will be appreciated in exactly the same way the Metro was. Also, what the Dubai Tram brings is greater mobility in an area that had witnessed transport challenges. It therefore adds good value to the lifestyle of the residents, benefiting Dubai Marina and its neighbourhood.
Source: Jobannie Tabada, Features Editor, Property Weekly