Many investors will have first heard of the Dubai real estate market in light of the 2008 US mortgage led economic crisis. This crisis led to a dramatic fall in the worldwide economy and despite initial resistance the Dubai property market effectively collapsed. Many new developments were never finished, investors lost significant amounts of money and many real estate developers went out of business. This placed massive pressure on the Dubai financial sector and indeed the authorities had to step in with a number of new regulations and financial support.
As you might have guessed, this collapse in confidence and real estate prices took some time to overcome but there are signs that the real estate market in Dubai is well-positioned for the longer term.
Market tainted by recent events
Aside from the collapse in the Dubai real estate market, perhaps exacerbated by the tremendous rise in prices just prior to the economic troubles, there were initial concerns about the role of the local authorities. Many people were concerned about a lack of regulation and structure to not only the Dubai real estate market but also the financial sector. In many ways these chickens came home to roost with an implosion of the financial sector.
Some investors may well have crossed the Dubai property market from their “to-do list” in light of these troubles but there have been significant changes in recent times. There is now growing confidence in the local regulators, a better structure to the industry and perhaps more importantly a number of safeguards to stop overheating. Whether it is ever possible to stop overheating in any real estate market is debatable but there are certainly some safeguards in place to assist the authorities.
Once bitten twice shy?
While some investors who lost their shirts in the Dubai real estate crash will likely think long and hard before re-entering the market, human nature is a fickle thing. As we have mentioned in the past, fear and greed and a relatively short memory regarding problems in years gone by are two very strong characteristics of the modern day real estate investor. Therefore, once the worldwide economy begins to move ahead and confidence grows will we see renewed appetite for Dubai real estate?
The fact that the population is expected to increase from 2.4 million up to 6 million by the year 2020 is something that should not be overlooked. It may not be the smoothest of long-term rides, there will be peaks and troughs but if you take a step back and look at the statistics in the cold light of day, surely they look encouraging?
Events of recent years will have taken a toll on confidence in the Dubai real estate market but let us not forget that many other real estate markets collapsed in light of the 2008 economic crisis. True, the fall in Dubai property prices was perhaps greater in light of the massive rise just prior to the crash. However, the authorities have made great strides in improving confidence, introducing new regulations and putting in place a robust structure for the future.
Looking at the cold hard statistics it is difficult to see why this market would stay off the long-term agenda of serious investors.