Dubai property market defies easy generalisations

Optimism about the Dubai property market has grown in recent months amidst a wave of positive reports from analysts. According to Jones Lang Lasalle, villa prices in the emirate began to recover towards the end of 2011 and are now at levels similar to early 2008.

But while reporting that the market is showing signs of recovery, these experts are also quick to point out that the market is becoming increasingly polarised, with prices rising in premium neighbourhoods but declining in less sought after locations. Even within the more sought after areas there is further fragmentation, as prices for different developments in the same location can vary significantly.

However, while these reports are helping to educate potential buyers and sellers, there are signs that many people continue to make generalisations that are no longer accurate about the market.

"The market has become very diversified now, yet people continue to talk about prices rising or falling in the most general terms," says Tom Bunker, an investment sales consultant at Better Homes. "There are a number of communities in Dubai where prices have begun to rise and indeed within these communities, some projects have appreciated faster than others, but we can no longer say that properties in Dubai are rising or falling across the board."

Miles Phillips, director of professional services and valuation at Realpoint real estate consultancy, believes that some sellers are feeding on the enthusiasm about a recovery and listing homes at overly-inflated prices.

"What I am finding is that in some areas of Dubai there is a widening gap between the asking price and the actual selling price," he said. "So what you have is a situation where there are an increasing number of sellers who are aware that prices are going up and while they once were considering putting their villa on the market for say four million, they're now going to ask for 4.5 million."
Phillips says these over-inflated asking prices are creating a false impression of the market, because the reality is that these prices are not always being achieved.

"Many agents I have recently been touch with say prices are increasingly being put up to unjustified levels and that anumber of deals are falling out of bed because the buyers are not prepared to come up to those levels," he told AMEInfo.com. "So while I am seeing increases, I believe prices were generally going up faster last year than this year, and a number of buyers are now standing back and taking stock of what's happened over the past few months."

Bunker agrees that prices in the emirate rose faster in 2011 as the market began to recover. "Last year we saw quite a few investors enter the market again and this caused property prices to begin to rise," he noted. "This year, there are fewer properties of this type available and prices have already risen so the marginal rise now is much lower."

Although prices are not rising as fast this year, it is not preventing some owners from listing their homes at over-inflated prices. Bunker suspects that many owners who are seeing similar homes selling for higher amounts are ignoring the differences in their properties.

"Not all properties are worth the same in a community like they were in the past. I have just gone through an exercise for one property type where I have seen the values for these particular properties rise from Dhs4.5m - Dhs6M in four months. Yet similar properties in the same community in other towers have remained flat. So people have to be careful when they compare property values," he said.