If you take a look at the basic figures, property values increased by 31% in first half of 2013, rents by 11.3% over the same period and many properties are nearly 40% higher in value than the lows of 2009, it does look as though the Dubai property market is moving into dangerous territory. However, one calculation which does not seem to receive widespread consideration is that Dubai property prices are still on average 31% off their 2008 highs. So, is the market just recovering or are we really in danger of another crash?
Before we take a look at some of the aspects that have impacted the Dubai property market it is worth noting that in general there has been a change in strategy amongst the Dubai public. Many people are now looking to buy their own property as opposed to renting, as they have done in the past, which is feeding demand for property in the region. There are also other aspects to take into consideration which we will cover below.
Safe haven status
The idea of a “safe haven status” is very dangerous in itself, as we saw during the 2008/9 property crash which derailed the Dubai economy. However, there is no doubt that with ongoing problems in Europe, the US economy sluggish at best and the Far East not performing as many had expected, many investors do still see Dubai as something of a safe haven.
Quote from PropertyForum.com : “Dubai is experiencing a mini property boom with sales and prices rising every month for over a year now but they are still some way below the peak of the market in 2008.”
While there is no doubt that the Dubai authorities have learnt lessons from the past, during which they fed the frenzy for property and the economic boom, they will need to keep a very close eye on property prices. Perhaps the fact they are now more active within the financial sector, reducing the flow of credit available and being proactive rather than reactive, should give us at least some comfort going forward?
Readily available mortgage finance
It is interesting to see the development of the Dubai mortgage market over the last four or five years which has given many individuals in Dubai the opportunity to consider buying their own property. In many ways this has again fed the frenzy for property in the region although, as we touched on above, the authorities are more proactive than reactive with regards to potential finance issues in relation to property investment.
If you take a step back and look at the situation, it was in many ways inevitable that the Dubai financial sector would emerge as a very different animal than that seen in 2008/9 when perhaps developers were offered finance well beyond their means. The reality is that the Dubai property market collapsed like a pack of cards once the bubble burst and one by one developers suffered financial heartache with many forced to delay or default on ongoing developments.
Complacency is the mother of all evil
While the Dubai authorities have been talking the talk, walking the walk and seem to be more proactive today than ever before, complacency is still the mother of all evil. We can only hope that the Dubai authorities will introduce an array of credit restrictions in the event that the property market continues to move onwards and upwards. Even though some of these decisions will be unpopular in the short term, they are vital not only for the long-term economic prosperity of Dubai but also the reputation of the authorities amongst investors.