The Dubai property market has been one of the more volatile over the last 20 years having risen from nowhere to top the real estate market tree only to fall by the wayside as a consequence of the 2008 US mortgage crisis induced downturn. However, 2014 saw something of a return to favour for the Dubai property market and just when investors were looking to increase their exposure the 2015 downturn hit home.
To say it has been a difficult time for Dubai real estate investors is an understatement having hit the highs of 2008 only to fall by the wayside, return to favour in 2014 and fall again in 2015. So, what does the future hold for Dubai real estate?
Oversupply of property units
Forecasting demand for new property units is not easy especially in the current worldwide economic environment. As a consequence it looks as though many new property units expected to hit the Dubai market in 2015 will now drag on into 2016. This is a direct consequence of the 2015 downturn which saw a reduction in demand, reduction in prices and perhaps more importantly the introduction of new regulations by the authorities.
It is obviously disappointing when markets react badly to the introduction of new regulations but this is certainly a step in the right direction. The ability to offer greater protection to both developers and investors is paramount to the long-term success of the Dubai property market. The regulators have taken the plunge, they have introduced an array of changes and perhaps 2015 was the year when the market began to adapt?
As you would expect from a deluge of new properties hitting the Dubai market there has been a softening in prices which is expected to continue into 2016. It is difficult to say with any real confidence when markets will hit the bottom but as this moment nears there will be an array of property investors jockeying for position. In many ways it is a case of when the big investors believe the time is right because in reality you will never buy at the bottom of the market and you will never sell at the top.
History shows us that as and when markets do turn they can turn very quickly with prices bouncing off the bottom. Therefore, 2016 could come down to pure timing for those looking at the Dubai property market and when they believe the market is nearing the bottom. It is also worth noting that there are rental yields of around 7% available in the Dubai property market which is extremely attractive especially when you bear in mind worldwide interest rates.
Even if you do not hit the bottom of the market, locking in a rental yield of 7%, with potential for long-term capital growth, is certainly not the worst thing you could do.
For many experts it is simply a case of waiting for the Dubai property market to turn when oversupply switches to growing demand. It is forecast that this turning point will occur towards mid-2016 although with rental yields of around 7% currently available we could see some investors start increasing their exposure fairly soon. The introduction of new regulations has given greater confidence going forward with both investors and developers covered to a greater extent than ever before. Could this be the long-term turning point in the Dubai real estate market? Will international investors return en masse?