Dubai real estate market witnessed major developments which include new laws, initiatives and projects announced. While prices on properties are still declining, governmental innovations in terms of visas, investments and business opportunities gave more freedom for investors to consider Dubai real estate market as an investment opportunity.
Over 19,700 units have been delivered year to date. Prominent deliveries include Bluewaters Residences, Damac Heights in Dubai Marina and multiple projects in Nshama Townsquare and Akoya (Damac Hills).
Dubai real estate secondary market
2018 was a good year for Dubai’s secondary real state market. While residential off-plan sales have been low (-32% compared to 2017), there has been a rise in transactional activity in the ready space.
Market correction occurred as property prices have adjusted to the increased supply. This benefits consumers who may have previously aspired to own a property but was priced out, and we’re happy to see long-time UAE residents begin to invest and buy properties as an alternative to renting.
Dubai government aims to attract more investors to growing Dubai real estate market by implementing different strategies which will benefit investors in the long run. Among the main governmental initiatives are:
- 5-, 10- year visas;
- 100% foreign ownership;
- Long-term residency.
Due to the numerous projects launch, some developers delay handover. Dubai government secured investors by implementing new regulation. According to DLD, developers who delayed handover for more than a year must pay investors an equivalent amount of 1-year rent.
A reform-oriented government continues to be the main driver of the Dubai real estate market growth. Local and international investors build more trust in this market and government in general.
Residential capital values
Overall residential capital values for existing freehold properties declined 11% annually and are 22% below their 2014 peaks. However, not all areas performed equally. The highest annual declines of more than 15% came from Business Bay, International City and Jumeirah Islands, locations with less than 6% declines were villas in Palm Jumeirah, Emirates Hills, and Al Furjan.
The rental market has become a tenants’ market
Landlords have moved from accepting only one cheque to accepting up to 12 cheques. Macro-induced crunch on the consumers’ purchasing power had prompted a fight for affordability in both the rental as well as the sales markets. It directly boosts the retail, insurance and banking sector as more people continue to call Dubai their permanent home.
The shift towards domestic end-users rather than investors took place, as well. Developers offer innovative self-funded payment plans directly to their purchasers, outside of the traditional mortgage market.
What is the current situation of Dubai real estate market?
At the moment, the Dubai real estate market is experiencing a decline in prices. The drop in the market of around 25% blamed on the oversupply of high-end luxury developments and falling oil prices.
Despite the decline in property prices in Dubai, several new initiatives were announced to improve the market sentiment and provide tangible returns.
One of the new regulations will see banks provided with more flexibility in terms of lending to real estate investors, which in turn will boost the market.
Developers are also focusing more on affordable units for the middle class, aimed at persuading renters to become buyers. They aim to create a community rather than just a single building. Some developers are following the trend when it comes to creating spaces that people can live, work and entertain themselves within.
According to Dubai real estate market experts, the market will start stabilizing in 2020 only. It is expected that more than 30 million people will visit Dubai for the Expo 2020. Among these 30 million, 70% will be from outside the UAE. The excessive supply will find its buyers and tenants. Implemented governmental changes only stabilize the Dubai real estate market and give an additional push towards its improvement.
Dubai real estate market is going through cycles, like any other market. Comparing to GCC real estate markets, Dubai is ahead of the curve which means that the worst situation passed. Today’s real estate market is on its way to stabilization.
Despite all rumors that Dubai real estate market will crash – it’s improving constantly. Due to governmental immediate initiatives and support the situation didn’t get worse and handled properly. What can we expect in 2019? The prices will be still dropping, but not that rapidly. By 2021 Dubai real estate market will stabilize.
What are the future trends and what should we expect? If you want to get more details on the future of Dubai real estate market – contact one of our property advisors. They will be able to provide all the needed details regarding the market situation and investment opportunities.