DUBAI REAL ESTATE NOW, AFTER THE CRISIS

 

Dubai, like the rest of the world, was hit hard by the 2008 financial crisis, especially in the Dubai Investment Real Estate. Though the dust hasn't quite settled, there is enough equilibrium in the sector to allow some assumptions and forecasts. The good news is that prospects are once again aplenty. With huge volumes of product left to market, a return to off-plan projects and purchases is a long way off.

Industry expectations of a return to speculation, fueled by cash-rich speculators snapping up distressed property at rock-bottom rates, have not materialised. In reality, fire sales were often conspicuous by their absence, with astute property groups and even sellers clinging to their holdings.

So, rather than the "gold rush" mindset of five years ago, we now have something that resembles mature real estate markets around the globe. To that end, here are five insights and forecasts about Dubai's real estate market right now.

1)      Speculation is no longer a realistic choice. "Irrational exuberance" is a thing of the past. For the next few years, buyers in Dubai will be characterised by end users and calculated investors seeking healthy, diversified portfolios.

2)      2) Off schedule, as we know it, is no longer an option. For the time being, land owners and agents must rely on reducing inventory. There may be room for certain niche projects, maybe at the low to mid-end, but I don't think developers or lenders would be interested in genuinely off-plan developments (those that exist only as blueprints) in the near future.

3)      3) Cash isn't king anymore. Cash reigned supreme after the recession, with banks restricting credit and the country's largest mortgage lenders unable to supply mortgages. Liquidity has returned, and decent mortgage rates are once again being promoted in print and on the radio. Rents are already low, so as they hit their lowest and continue to rise, house prices will rise with them.

4)      4) It's more about the place. The demand for high-end properties on the Palm, the Slopes, and other ultra-prestigious projects has hardly slowed in the last three years, amid the headlines. It is not rare for villas to swap hands for ten, fifteen, or even twenty million AED. dubai developments trends in the upper and middle tiers have also proven to be appealing. While prices have fallen from their peaks, the demand for homes in the Greens, Lakes, and other related projects is reviving. The areas surrounding the Burj Khalifah, especially Downtown, are proving to be extremely desirable, indicating that sentiment is favourable for projects - and developers - with a track record.

5)      5) It's not just about the opulence. A strong distinction in terms of position and price points is one of the healthiest effects of the bubble bursting. Whereas previously, almost all properties were branded and sold as the pinnacle of luxury, we can now clearly differentiate between developments, owners, and houses, and price them appropriately.

It's doubtful that we'll see speculative highs as we did in 2007, so that's a positive thing. Instead, we can anticipate a developed, stable real estate market with plenty of options and more easily quantifiable value.

·         Dubai-UAE-based Kabir Mulchandani Skai Holdings

My essays are meant to express my views and observations, as well as to engage in a dialogue about the Real Estate Companies in Dubai, entrepreneurship, new books, and fresh ideas about how to develop things.