Dubai was one of the worst performing real estate markets in the world over the past three years, with prices in the emirate having fallen by up to 60% in some areas from their peak in 2008. The commonly held view among analysts is that oversupply will continue to be a key driver behind falling prices, with Colliers estimating that around 13,000 units are due to come online by the year-end, followed by a further 27,000 properties in 2012.
However, although new supply continues to enter the market, it does not mean all areas are oversupplied, Mahoney told AMEInfo.com. In fact, available stock in prime areas has dwindled in recent months.
“Our single biggest challenge today is gaining access to good properties for sale and to rent,” he said. “This is at a time when everyone two or three years ago would have anticipated just this incredible oversupply in which people would have been giving property away and there would be nothing you could do with it.”
“But that really hasn’t been the case. There have been periods when there has been a lot of oversupply in certain specific areas, but time and time again those areas have managed to attract tenants and absorb the stock. There is a shortage. We struggle to find enough property.”
Mahoney is quick to point out that this doesn’t mean there isn’t currently an oversupply in certain areas. “I’m sure there is oversupply in specific areas of Dubai, but all of the established prime areas of Dubai including places that are further out like Silicon Oasis and Discovery Gardens, there is a lot of demand,” he said. “It really has flown in the face of what people have anticipated.”
He cites Palm Jumeirah, Dubai Marina, and parts of Meadows as a few of the areas that are seeing a rise in prices. “We came out of a period of very low activity and very low transaction numbers in 2009 and 2010, and we’ve seen that pick up dramatically from the beginning of the year till now with the exception of August,” he said.
“So we know there is more confidence, we know there is more demand, and that there are more transactions. We know that it is affecting prices in some areas, because we can see prices rising.”
Dubai property market close to bottom
One of the factors boosting demand is a sense that the market is probably at the bottom or close to it, he noted. Dubai is also benefitting from the fact that it has avoided the unrest that other countries in the region have experienced.
However, Mahoney says his company has not seen the huge influx of buyers from trouble spots in the region that some pundits had been touting. “There was a lot of speculation that the Libyans will be coming and we haven’t seen any of that. There has been a little bit of a rise in Egyptians coming into the market and so on, but in general the fact that the UAE has remained trouble-free while other countries experienced unrest has helped bolster the confidence in Dubai that had already been growing so far this year.”
An additional factor working in Dubai’s favour is the stabilisation that the market is seeing after the challenges that it has faced over the past few years. “There has been a growth in confidence based on a realization that Dubai is not going anywhere and it can withstand a heavy hit as it did over the past couple of years. People perceived Dubai as being very fragile and expected it to fade away into the sand,” he noted.
“But this whole episode has given people the sense that Dubai is not so fragile and is robust enough to withstand the volatility of the marketplace.”