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The real estate industry in the UAE is going through a challenging time with the slowdown expected to continue for a couple of months.
But Anjum Bhat, online marketing strategist at Aston Pearl Real Estate, believes that the current price correction is good news for both the investors and the end-users.
The current market scenario indicates a slowdown and property prices are expected to drop for the rest of the year.
Many factors are contributing to it, including currency fluctuations and a wait-and-watch attitude from investors.
A number of new residential units have been and are scheduled to be released.
Though the number has been exaggerated, the property market needs to create a balance between supply and demand fundamentals and reduce the gap between the two.
Developers will need a strategy to release inventory which is aligned with the absorption rate.
The federal mortgage cap and the increased registration fee have cooled down the market, but have also closed gates for many prospective buyers who would purchase in the absence of these restrictions.
At this time, maybe the mortgages need to be made flexible and other restrictions need to be implemented to curb flipping.
Some good examples that were introduced in other countries include the Sellers Stamp Duty (SSD) in Singapore where one has to pay a duty if one is selling or disposing off a property within four years of acquiring it.
In New Zealand, a tax of 33 per cent is charged on any property that is bought and sold within two years of its purchase.
The current market slowdown can be a prolific time for investment, as investors have an edge during a down market when there are a lot of properties for sale and more motivated sellers, which create an opportunity for everyone.
There is never a wrong time for investment if you have the right strategy.
After all, investors cannot only benefit from an upward market.
The good news
Property prices have softened since the start of the year and continued to fall in the third quarter.
This price correction can be beneficial as affordability increases.
These are the signs of a mature real estate market, which has entered into a self-correction mode.
This will result in avoiding a bigger correction in the future, helping regulate the market.
However, the supply and demand needs to be controlled and a balance has to be created.
There are no signs of a property bubble and the International Monetary Fund (IMF) has already withdrawn its concerns.
This year’s Cityscape focused its spotlight on the need for affordable housing.
The introduction of affordable housing will open up a new untapped market segment that will create local demand from end-users and investors.
This is where the developers need to concentrate as end-users will keep the market buzzing at all times and help in overall economic stability.
Dubai’s diversified economy, low dependence on oil and strategic location, which make it a trading and business hub, has benefitted the UAE as the main recipient of private capital in the GCC.
This year, the UAE has maintained its position as the top destination for investment among GCC countries and status of “safe haven” for private capital.
Cash flow has also been majorly coming from troubled areas in the region which boosted real estate sales and other investments in the emirate.
Political stability and investment opportunities are cited as major drivers for capital in the UAE.
Indians form a major share of foreign investors in the property market in Dubai. They have a bonding with the city and factors like high capital appreciation and good rental yields appeal to them. Property prices are also cheaper in Dubai when compared to upscale communities incities like Mumbai and New Delhi. However, in the past months, the Indian rupee has weakened against the dirham which has slowed down investment from Indian buyers.
Looking at the crystal ball
2015 has been a challenging period for Dubai real estate. Property prices declined, transactions slowed down and the market saw a downturn underlying investor confidence. Property prices are falling and are expected to fall till the end of the year. For long-term investors, the current low prices are advantageous as they can make profits once the market shoots upwards. For buy-to-rent investors, the high rental yields are still an attraction as yields remain higher compared to other major cities and the demand for rental properties is expected to increase as Expo 2020 infrastructure project work starts.
Source: S. Dhar, Special to Freehold