Wealth Monitor April 2016 | Page 14

BULLS VS BEARS | UAE Property Outlook global economic challenges and concerns over local market dynamics. Oversupply and the slowdown in a number of key source markets, including some of the BRIC economies, were important factors in this shift. Whilst supply fears have yet to be realised amidst the slowing pace of many construction projects, Dubai has become a more expensive investment destination for some international investors due to the unrelenting strength of the US dollar, resulting in weaker inward investment volumes over the last 2 years. However, history has shown that Dubai has a cyclical and often speculative real estate market, attracting significant capital from international investors over the years, buoyed by its safe haven status within the region. As a result, we would expect to see off-plan properties find favour once again as the Emirate starts to recover. Haider Tuaima, Head of Research, ValuStrat Property Prices Begin Stabilizing Property prices in Dubai were indeed in a downward spiral, but only for a limited period, between July 2014 and July 2015, after which, prices generally began to stabilize. According to our proprietary ValuStrat Price Index (VPI), June 2014 saw an index peak of 112.9 points as compared to the starting 100 point index for January 2014, by July 2015, the index dropped to 98.4 points, bottoming out at 97.9 points in January 2016, it then saw a slight uptick to 98.0 points during the following month. Therefore there was no effective overall change in values across the 26 neighborhoods we measure during the second half of last year, with a minute indication of recovery in some districts during the first quarter of 2016. As far as Dubai’s asking rents are concerned, they continue to soften. 12 Demand on Generally speaking, there’s continued demand for the full spectrum of properties on offer, however, we do see more focus on properties priced less than AED 1 million as almost half (46%49%) of the residential transactions in the last 14 months were in this bracket, while on the other side of the spectrum, properties priced more than AED 10 million represented 1.47% of all residential transactions during Q1 2016, which is double the 0.72% recorded the quarter prior to it. Speculators Out Of Picture With speculators mostly out of the picture, off plan investors as well as future end-users have become more cautious with their decision making as purchasing off plan can involve a number of risks or drawbacks, especially in the case of buying somethin