Is it the right time to invest in Dubai properties?
With the recent fall in property prices, we explore whether it is a good time to invest in Dubai.
The Chinese saying “May you live in interesting times” seems to have correctly fitted for Real Estate industry in the UAE, in many more ways than imagined by the forecasters. Not too many intellects would disagree, the changing statistics of Real Estate industry in the UAE, and rapidly falling prices is a matter of major concern. While most of the investors have also understood this phase as a boon period of investment but remain silent on the growth of the real estate industry. The industry seems to step out of black in near days.
The UAE’s residential sector has seen its real estate turn in rough estate. By the end of last year too, the industry wasn’t benefitted much. The statistics have seen a major fall in recent times, on an average the apartments being sold have decreased by 5%, whereas Villas dwindled by 3%. The story felt sadist when the total figure shrank by 16% in case of apartments and 13% for villas.
But as mentioned earlier the change of quarter also managed to see an increase in affordability of buying properties by a recommendable digit of 22%. Some other researchers have even claimed an increase of 41% in monetary exchange related to completed units, which is favourable in comparison to that of 2017.
The last quarter of 2018 was not favourable for projects like Dubai Sports City, International City and Jumeirah Village Circle (JVC) that observed a fall in prices by 9%. Further the story of diminution was continued by Downtown Dubai and The Greens with an observation of downfall by 7% and 8% respectively. The only brand that was successful in keeping its knees straight in the tough hour was Dubai Marina, with a minor drift of 1%. Discovery Gardens was one that had witnessed the major reduction by 25% and Dubailand which has an unmatched stature in the country witnessed a drop of 5%.
The industry seemed to be getting out of the black clouds with silver linings in the form of new laws, initiatives and projects announced. The wider view from this point looks promising for coming months of 2019. As the law of flow speaks, it shall move on, the market has attracted more number of investors and tenants in comparison to previous years. Further we are expecting better stats from first quarter in context of first time buyers. The change is an indication of better lifestyle; the fall in rent rates may attract bigger homes for tenants.
On the other hand the fall in prices have also discouraged investors looking ahead for short term profits. We had a chance to get in touch with Adriana Usvat, founder of FLC Group, mainly engaged in marketing activities, but have a strong interest in property investment. Adriana, being an active investor has chosen Bali over the UAE; she has plans to halt her decision for investing in the the UAE market seeing the continuous fall in prices. Though like all other market players, she too has a strong conviction in the market and its elevation in coming months. Adriana has her interest in hospitality industry and Bali market has successfully convinced her to invest. It is high time the UAE should take a step to attract investors back in the market.
While developers have been facing a rough phase, we entered in a conversation with Zain Khan, founder of ZGC properties in Dubai who feels that the location based properties have been able to save their interest in the time of crisis. He expects to see another two years in the similar situation with a fall of around 10%, but feels positive for 2021.
Zain feels a pride in sharing the best reasons to invest in The UAE. In the first place the option of 100% ownership has been a matter of attraction. Further, the UAE is a tax free trading hub between the East and the West. And the most important is its ranking in the world’s top five destinations that attracts high numbers of tourists every year. He strongly feels that the investors should take care of the certainty of the property according to its location. Also the understanding of the Capital Appreciation in context of investment is important. He recommends a good background check of the developer, by taking care of all the needed due diligence and legal compliance.
Though we adhere to all the facts that market players have addressed but Mario Volpi, Chief Sales Officer of Kensington Properties, have a different perspective. He says “whilst we are currently experiencing a somewhat challenging property market, where prices are naturally soft but in order for developers to keep the ticket prices of residential property at what can be described as affordable to the average person, the actual size of the finished unit will also have to be reduced.”
The government is well aware of the market flows and thus has shown a ray of flexible payment plans for off-plan projects. Also some interesting news for post-possession payment plans may show better trust in the investors. Thus, market stats become more interesting, with a variance in demand and supply figures. And as all the churning initiates, the end users enjoy the fortune to buy better properties in their desired investment. In the coming months we are expecting the market developers to come up with creative ideas to market tenants, and compel them to think about investing in properties. We have already witnessed Dubai Sports City and Al Furjan to come up with similar plans. Our recent resources have confirmed a positive effect of Expo 2020. And with every inch nearing, the real estate market seems to be breathing positive air.
While our research made us hover upon apartments and villas, we couldn’t have ignored the crisis being faced by landlords. It is sure that the continuous addition of new stock, with an unsure demand pattern has been a pressure factor on the landlords. The stress is high to either retain the existing tenants or attract new at competitive prices. The ways involved in retaining has become stricter in last few years with multiple cheques, rent-free periods and in some cases agency fees being covered. But we fear the same to affect the tourist enthral market. We are expecting Expo 2021 to increase the short term visitors, and the lucrative landlord policy may seem to make the situations tough. Nevertheless we are expecting the market to cope up by then, or if not wholly at least the new laws and plans shall magnetize.
We are sure that the market shall crawl for a while but will learn to run sooner. We suggest the investors to keep their spirits high, as the UAE has always been a charmer. The new buyers should plan their investments soon as it is always good to catch the fancy. But we are looking ahead to the changes, as they seem to be frenetic and exciting- and focus to be on the emotional pulse too. And we are sure that market investors shall end in the back of crisis sword than on front.