Dubai is growing up!
Since the beginning of the real estate boom in 2004/2005, when foreign investors were allowed to invest in freehold property, the market saw an influx of foreign as well as local speculators, which soon drove up sales and rental prices due to rapidly escalating demand. The demand was so high and growing so fast, that this was taken as an indication as to the future need and necessary development of the emirate.
Before the peak in Q3 2008, sellers and landlords were better off with bargaining power on their side, due to the supply and demand conditions at that time favouring them, instead of buyers or tenants.
However, soon after the global economic downturn in Q3 2008, a shift between owners/tenants and buyers/landlords was noticeable and the market emerged as a “buyers” market, whereby buyers and tenants alike had more room for negotiating property prices. This shift was due to a switch in the supply and demand dynamics in Dubai real estate, whereby demand was practically non-existent and supply was high.
The onset of the global economic downturn caused the sharp drop in both the residential and office sectors. Previous speculative demand had escalated prices to unrealistic and unreasonable heights. Prices were driven up as a result of greed but the underlying value of a property was not taken into account. With the onset of the crisis, demand had practically vanished and as a result, property prices started to decrease. With speculative demand no longer in the market, there was no driving force to raise prices and as a result overall market rates saw a sharp drop.
In the followings months when the global credit crisis seemed to deepen, demand was practically non-existent and those who could not continue to make payments towards their existing investments tried desperately and as quickly as possible to sell their properties. As there was no demand, prices dropped even further and buyers who knew that they now had the bargaining power used this to their advantage to press down prices even further. At this point most of the distress sales occurred whereby some units were even sold at or even below original price. For cash rich investors and end-users who do not have the need for financing, this was the best time and still is the best time to invest in the Dubai property market, as prices have already started to recover in many developments.
Rumors of a mass exodus of expats living in Dubai had been greatly exaggerated, especially in the international media. Of course some expats have been greatly affected as a result of the global economic downturn and have subsequently had to leave the country. However looking at recent news, local media reports that the number of residency visas cancelled in 2009 has infact been less than in the previous years 2008 and 2007. Furthermore, recent media have reported that more and more international companies are looking to set base here in the UAE due to the favourable business conditions the UAE, especially Dubai has to offer. Therefore it is unlikely that Dubai will experience a “mass exodus” of expats in the near future.
Just before the turn of the decade the news on Dubai World had the whole world and financial markets up in turmoil. This propagandist attempt at slandering Dubai to make it look weak and near breaking point obviously did not work and was purely to distract the attention away from those countries who were at the forefront of reporting on the Dubai World issue. In comparison to the financial issues which many other Western countries have, this was blown way out of proportion and was dealt with quickly as two weeks later, Abu Dhabi announced it would help Dubai meet its payment obligations.
This only demonstrated the close relation between the royal families of each emirate and the fact that the UAE overall enjoys a certain economic stability due to its oil reserves.
With the inauguraton of the Burj Khalifa on the 4th accession of Sheikh Mohammed bin Rashid al Maktoum, Ruler of Dubai and Vice President of the UAE, interest in Dubai real estate has been renewed, particularly in the Downtown Dubai area. Dubai has once again shown what it stands for and that throughout all the troubles of 2009, it has managed to deliver an icon of its times, the largest building in the world.
Entering 2010, we would say that we have reached the bottoming out of prices in most developments, whilst there are still some areas, which may see a further drop in prices, although not as large as in Q1 and Q2 2009. Furthermore, banks have cautiously started to lend again in certain projects, which has helped to maintain more stable price ranges and is encouraging to end-users who wish to buy real estate in Dubai.
Overall, we have begun a good and encouraging start to the year and we are optimistic that 2010 will be a successful and productive year for us and the Dubai real estate market.
Before the peak in Q3 2008, sellers and landlords were better off with bargaining power on their side, due to the supply and demand conditions at that time favouring them, instead of buyers or tenants.
However, soon after the global economic downturn in Q3 2008, a shift between owners/tenants and buyers/landlords was noticeable and the market emerged as a “buyers” market, whereby buyers and tenants alike had more room for negotiating property prices. This shift was due to a switch in the supply and demand dynamics in Dubai real estate, whereby demand was practically non-existent and supply was high.
The onset of the global economic downturn caused the sharp drop in both the residential and office sectors. Previous speculative demand had escalated prices to unrealistic and unreasonable heights. Prices were driven up as a result of greed but the underlying value of a property was not taken into account. With the onset of the crisis, demand had practically vanished and as a result, property prices started to decrease. With speculative demand no longer in the market, there was no driving force to raise prices and as a result overall market rates saw a sharp drop.
In the followings months when the global credit crisis seemed to deepen, demand was practically non-existent and those who could not continue to make payments towards their existing investments tried desperately and as quickly as possible to sell their properties. As there was no demand, prices dropped even further and buyers who knew that they now had the bargaining power used this to their advantage to press down prices even further. At this point most of the distress sales occurred whereby some units were even sold at or even below original price. For cash rich investors and end-users who do not have the need for financing, this was the best time and still is the best time to invest in the Dubai property market, as prices have already started to recover in many developments.
Rumors of a mass exodus of expats living in Dubai had been greatly exaggerated, especially in the international media. Of course some expats have been greatly affected as a result of the global economic downturn and have subsequently had to leave the country. However looking at recent news, local media reports that the number of residency visas cancelled in 2009 has infact been less than in the previous years 2008 and 2007. Furthermore, recent media have reported that more and more international companies are looking to set base here in the UAE due to the favourable business conditions the UAE, especially Dubai has to offer. Therefore it is unlikely that Dubai will experience a “mass exodus” of expats in the near future.
Just before the turn of the decade the news on Dubai World had the whole world and financial markets up in turmoil. This propagandist attempt at slandering Dubai to make it look weak and near breaking point obviously did not work and was purely to distract the attention away from those countries who were at the forefront of reporting on the Dubai World issue. In comparison to the financial issues which many other Western countries have, this was blown way out of proportion and was dealt with quickly as two weeks later, Abu Dhabi announced it would help Dubai meet its payment obligations.
This only demonstrated the close relation between the royal families of each emirate and the fact that the UAE overall enjoys a certain economic stability due to its oil reserves.
With the inauguraton of the Burj Khalifa on the 4th accession of Sheikh Mohammed bin Rashid al Maktoum, Ruler of Dubai and Vice President of the UAE, interest in Dubai real estate has been renewed, particularly in the Downtown Dubai area. Dubai has once again shown what it stands for and that throughout all the troubles of 2009, it has managed to deliver an icon of its times, the largest building in the world.
Entering 2010, we would say that we have reached the bottoming out of prices in most developments, whilst there are still some areas, which may see a further drop in prices, although not as large as in Q1 and Q2 2009. Furthermore, banks have cautiously started to lend again in certain projects, which has helped to maintain more stable price ranges and is encouraging to end-users who wish to buy real estate in Dubai.
Overall, we have begun a good and encouraging start to the year and we are optimistic that 2010 will be a successful and productive year for us and the Dubai real estate market.
