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The rental and sales prices of properties have not actually come down. If one would check the market prices and rents in mid-2013, one would see that the mid-2014 prices and rents have remained closer to it, with slight growth.
The prices that increased beyond a reasonable limit due to the Expo 2020 frenzy between the third quarter of 2013 and the second quarter of 2014, to the extent that the market fundamentals could not support them, had to come down to the levels that the market fundamentals could support them.
Last year, most landlords hiked rents – not only in Dubai, but also in Sharjah and the Northern Emirates – significantly. In some cases, the jump was as high as 50 per cent, which the market could not sustain. If the economy grows at 5 per cent, rental and sales prices should grow in accordance to that, not a 50 per cent jump. So, the correction had to happen. That was what happened in the second half of the year, and that was good for the consumers, buyers and the market.
No matter what will happen, Dubai’s real estate market will not witness the bull run of the 2006-2008 period. It happened due to lack of strong regulations, excess liquidity and irresponsible lending.
The Real Estate Regulatory Agency (RERA) is very strict on all these issues and violators are being fined. Real estate brokers, guided by the RERA rules, know what they can and cannot do. These developments have made Dubai’s real estate market more stable, responsible and mature. With the Expo 2020 hype coming to a more realistic level, we have seen the market stabilize.
Going forward, as the market matures further, developers who can offer better financial options and strike good mortgage deals with banks for their projects are expected to dominate the market.
Most families with household incomes in excess of Dh25,000 to Dh30,000 can move into their freehold homes by putting their rents into mortgage payments. They would be more inclined to do that now than before as there is more clarity in the property sector, and the buyers can now differentiate between the good and “not so good” developers.
• The new regulations have contributed to the stabilization of property sector
• Real estate brokers are guided by RERA rules, preventing violations and fines
• Most families can now move into freehold homes by putting rents into mortgage
Source: Mahendra Singh, Special to Properties
The writer is a Managing Director, SPF Realty