Dubai real estate market softening

In many ways the Dubai real estate market is reminiscent of a young London property market seemingly able to fight the force of gravity and economic pitfalls. We all know how well the London real estate market has performed, especially since the 2008 mortgage crisis, but there are signs that the Dubai property market could be running out of momentum. A survey over the last few days shows that 60% of real estate agents in Dubai indicated a drop in real estate prices over the last three months.

This seems to firm up recent reports, many of which were ridiculed, suggesting that the Dubai real estate market is starting to weaken.

Is this a self-fulfilling prophecy?

Time and time again we have seen experts looking to talk down the Dubai real estate market. While it is obvious from the figures that there has been a swift change in momentum over the last three months, is there any reason to be fearful for the longer term?

While prices may have softened of late, down 3% year-on-year and 21% against the third-quarter peak in 2008, what is happening to the rental market? Interestingly while rent inflation may have reduced of late there is still good demand for rental properties and this particular market is still fairly stable. Some experts believe that the strong dollar and difficult worldwide economic environment have encouraged potential investors to hold back for the moment.

What does the future hold?

Interestingly, the survey which highlighted a drop in prices over the last three months has unearthed some surprising support for the next 12 months. Of those real estate agents interviewed a significant 45% expect prices to rise over the next 12 months with just 30% forecasting a reduction. While these finely balanced polls can change fairly quickly it does seem that while the short term outlook is mixed to say the least, the longer term outlook is still positive.

Sometimes it is easy to forget that Dubai suffered a momentous rise and fall at the turn-of-the-century and has had to introduce an array of new regulations to protect markets going forward. The truth is that great progress has been made in this particular area although there is still further work to be done – but investor confidence in Dubai as a whole seems to have benefited.

Long-term investment

We have seen significant investment by the Dubai authorities over the last few years as a means to change the shape of the economy going forward. Now more heavily reliant upon the services industry, with the real estate sector still extremely influential, economic growth in Dubai has outstripped that of the United Arab Emirates by some distance.

The ongoing improvements in the Dubai infrastructure will continue to attract more and more employers in years to come. This in turn will increase demand for property in the region and should lead to a long-term growth trend. Of course there will be blips, there will be short-term corrections but this ongoing softening of Dubai real estate prices could offer an interesting buying opportunity for those willing to take a long-term position.

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