After the Crisis - Dubai Real Estate Today
By Kabir Mulchandani
The financial crisis of 2008 effected Dubai as much as the rest of the world, especially the real estate industry. While the dust hasn't entirely settled, the sector has returned to enough stability to make a few observations and predictions. And, the good news is, opportunities once again abound. A return to off plan developments and sales is some way off, with large amounts of inventory still to sell-off.
Industry predictions of a return to speculation, fueled by cash-rich speculators buying up property in distress sales at rock-bottom prices, have failed to materialize. In fact, fire sales were largely notable by their absence, with canny property groups and even buyers holding onto their assets.
What we have, then, is something that more resembles mature real estate markets the world over than the "gold rush" mentality of five years ago. To that end, here are five observations and predictions about the current state of the property market in Dubai.
1) Speculation is dead. The days of "irrational exuberance" are over. End users and measured investors looking for balanced, diversified portfolios will define buyers in Dubai for the next few years.
2) Off plan, as we know it, is over. For now, anyway, property developers and estate agents must concentrate on reducing inventory. There may well be scope for some niche developments, perhaps at the low to mid-end, but in general, I don't see investors, or lenders, having much appetite for truly off-plan developments (meaning those that exist only as blueprints) for the foreseeable future.
3) Cash is no longer king. Post-crisis, with banks reining in lending and the country's biggest mortgage providers not providing mortgages, cash was supreme. Now, liquidity is returning, with good deals for mortgages once again being advertised in print and on radio. It's still cheap to rent, but once those rents bottom out, and inevitably start to rise, we'll see house prices follow suit.
4) Location is everything. The headlines may not have reflected this, but demand for high-end properties on the Palm, the Hills and other ultra-prestigious developments barely abated over the past three years. Villas changing hands for 10, 15, even 20 million AED has not been unusual. Established developments in the upper and mid-level, too, have been proving attractive. Yes, prices are down from the highs, but the market for properties in the Greens, Lakes and similar developments is returning. Most exciting, though, are the areas surrounding Burj Khalifah, especially Downtown, which are proving extremely desirable, and show sentiment is positive for developments - and developers - with proven track records.
5) It's not just about luxury. One of the healthiest consequences of the bubble bursting is a clear differentiation in terms of location and price points. Where, once, virtually all properties were marketed, and sold, as the height of luxury, we can now easily distinguish between projects, developers and buildings, and price them accordingly.
It's highly unlikely we'll return to the speculative heights of 2007, but that's a good thing. Instead, we can look forward to a mature, stable real estate market, where choice abounds and value can be more readily quantified.
My writings are to share my thoughts and opinions, and to engage in a conversation about the property market, entrepreneurship, new books and new ideas about how to change things for the better.