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.
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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