Dubai re-sale market faces its biggest test so far

Dubai estate agents forecast a market slowdown earlier this year. But delays to the delivery of new homes meant that the flow of new property on to the market was less than expected.

Now the completion of projects like The Springs, with some 4,000 units requiring final payments from their new owners, is likely to test the strength of the Dubai property market this autumn. Other large villa schemes, such as Meadows 4 and 5 will also be handed over shortly.

However, thus far the trend has been towards rising prices in Dubai with premiums being paid ahead of completion. Sums from 10 to 50% above the initial selling price by the developer have become normal, and speculators have been able to profit by paying deposits on homes they have no intention of buying on completion.

There is no reason to believe that this will not continue. Dubai property remains relatively cheap in international terms. That is to say the rental yields on property are well above the global average.

All the same, a combination of higher initial asking prices by developers, and a little weakness in rental levels due to oversupply, is beginning to erode this advantage.

Depending on the number of new expatriates setting up home in Dubai this autumn, this may well just prove to be the impact of a couple of months of soft summer trading. The combination of the hot summer sun and absent owners and landlords traditionally results in a few bargains in late summer.

Thus for those renting properties this is a good time to move, and for would-be buyers this is an opportunity to shop around rather than take the first property presented by an agent. But beware! The capacity for Dubai to absorb villas may prove much stronger than people think, and the Emirates Hills district, for example, is now fully sold.

Oil prices remain high, and until there is a substantial weakening of prices the dynamics of the business that drive the Dubai economy will not falter.

If anything with projects like the Dubai International Financial Centre, Dubailand and the Burj Dubai complex on the starting blocks things are going to get a lot hotter yet. The development of Dubai is moving into another phase.