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It is obvious that there is a continuing positive development and rise in the number of new real estate structures in Dubai.
James Perry of haus & haus talks about what to expect from the industry this year.
An optimistic 2015
A current question people discuss in property circles is “what does 2015 hold for the real estate industry?” Although there are many articles and expert opinions on this subject, who can really look into the future? Until this year, property prices have increased year-on-year since 2010/11 at an unsustainable pace and needed intervention to prevent a crisis similar to that of 2008/09.
Most property markets such as the UK work on a cyclical basis where a seven-year cycle often portrays a typical term viewing healthy, sustainable growth. We have recently witnessed both falling sales volumes and figures and buoyancy on the rental side.
There is still a huge amount of investments coming to Dubai and the hotel sector has some of the highest occupancy rates worldwide, positive signs things are not slowing down too much. The tax advantages are enticing for foreign money and the UAE is perceived as a safe haven for most.
Although some downturn is anticipated, I envisage a positive reinforcement of the market in Q3 and Q4 this year.
Affordable housing solutions
The private sector would benefit from regulatory changes to ensure that affordable dwelling demands are met. The private and public sectors usually go hand in hand and the overall benefits for the economy would be driven by market dynamics buoyed by middle income expats.
The government could incentivize private developers by allocating less expensive land, in turn promoting affordable housing. Private developers could review the sizes of units, lower specifications and lessen the amenities to reduce pricing. Concierges and marble finishes are commonplace in Dubai and provide ambience, but would the average resident miss them?
Construction costs here in the UAE are relatively cost effective, but private investments resulting in affordable housing ultimately lies with government institutions. More cohesive projects and selective construction programs would mean that residents in need would be exposed to affordable housing solutions.
The mortgage cap has made a significant difference to the fluidity of the market. Competition among banks is enabling clients to choose the most suitable mortgage for their individual circumstances. There is real market infrastructure now should a client want a one or even five-year fixed interest rate. Similarly, there are mechanisms in place if clients want to know what their monthly payment is for the full term of the loan.
I believe that 2015 will further increase the competition and mortgage products will continue to develop to match customer requirements.
I believe a positive step for the UAE market would be the rent-to-own scheme being made readily available. This would help buyers who are struggling to get the required deposit to meet the mortgage cap implications. The introduction of such a scheme would bring real confidence into the market and could potentially decrease the transient nature of Dubai. In promotion of this, we could see an upsurge of people making Dubai a long-term home rather than the typical two to five-year plan that is often heard.
Some first-time buyers feel there is a risk element to investing savings here and a scheme of this nature could help increase buyer confidence, especially in a tough market. Having the flexibility to terminate tenure without penalty gives consumers the advantage of trialling areas before purchasing and the option of utilizing the rent towards the deposit.
The demographics of expats in Dubai are relatively young and, as in the other successful countries, a rent-to-own scheme could revolutionize the market and bring another favorable dimension to it.
Ensuring affordable dwelling demands
* The government could incentivize private developers by allocating less expensive land to promote affordable housing
* Private developers could review sizes of units, lower specifications and lessen amenities to reduce pricing
* More cohesive projects and selective construction programs would mean residents in need would be exposed to affordable housing solutions
* Reasonably priced mortgage products are developed to match customer requirements
Source: Cleofi-Krista Capili, Special to Freehold