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Real estate trends in Dubai have revealed a slowdown in sales of villas and apartments during the third quarter of 2014. But many experts believe that there is no need to press the panic button and that the industry is not facing a crisis.
Apprehension about oversupply in the market is also far-fetched as the emirate is set to witness a substantial rise in population. Around 90,000 new housing units are expected to hit the market in the next four years.
With Dubai’s population set to witness an annual growth of around 5 per cent, driven by new employment options for expatriates, it is expected that the new stock will be absorbed by the new residents.
Katie Geeves of Acrohouse Properties shares her views on the current real estate scenario in Dubai.
The current market is seeing a slight correction in prices at which transactions are happening. We have witnessed more noticeable drops in offer prices. Sellers have become more realistic with their offer prices now and we feel that is good for the long-term future of the industry. We are already witnessing a pickup in transactions in the last few weeks and expect prices to pick up by early next year once all the properties currently being offered at reduced prices get sold.
A big difference between the slowdown we are witnessing currently (from the past) is that it has been infused by policies from the government, which can always be reversed if the market were to drop further.
Some of the regulatory measures used by the government to prevent the market from heating up in-cluded imposing a higher transfer fee which has been doubled from 2 per cent to 4 per cent.
The mortgage cap limiting the amount of money that can be taken as loan to fund a property also had an impact.
In the case of expatriates, the Central Bank has set the mortgage limit for the first house (for owner occupier) at 75 per cent of the value for properties that are valued less than Dh5 million. If the value of the property is more than Dh5 million, an expatriate borrower can borrow a maximum of 65 per cent of the value of the property. For a second house or investment property, expatriates will be eligible only for mortgage of up to a maximum of 60 per cent of the value of the property.
These steps provide a sort of safety net to the market. Buyers are generally more aware and more cautious now about the properties they are planning to invest in. This is good for the long-term health of the market.
Developers are strict about payment plans, and the government has come up with some really good regulations to protect the market.
Oversupply fears are overrated
We do not feel that the Dubai market will suffer from oversupply in the near future.
The handover of properties currently under construction will happen in stages. The population of the city is going up at the same time; they will absorb the new supply.
One should look at the rental market, which has been quite steady in the past few months. This is an indicator that demand for properties is not waning.
Emerging residential hot spot
Dubailand is one of the emerging residential hot spots for property owners in Dubai. It is witnessing a steady demand, with prices of properties still low. You get real good value for your money here as you can purchase a bigger property.
It has huge potential, and the necessary infrastructure and amenities like restaurants, supermarkets and health care facilities are coming up to attract the residents. There is land still available for development.
Dubailand is already home to some really popular communities. However, it will still take four to five years for it to be at par with some of the established residential areas of Dubai.
Transactions in other emerging localities like Jumeirah Village Circle (JVC) and Jumeirah Village Triangle (JVT) have remained constant. These areas hold a lot of promise for the future. Currently, the property prices in JVC and JVT are attractive.
The flight to affordability
Sharjah recently opened its residential property market to direct investments by non-Arab expatriates holding a UAE resident visa. Non-Arab expats can now acquire plots at a newly launched master development. Until now, only UAE and GCC nationals were allowed to acquire plots and properties in the emirate. However, it will not have any impact on the real estate industry in Dubai. It is an attractive option for people living in Sharjah, but residents from Dubai are not expected to shift to the emirate because of it. At the moment, there are plenty of housing options within Dubai to suit all budgets.
Source: S. Dhar, Special to Freehold