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Dubai real estate market values might be low now, but Expo 2020 will turn the tables

Has Dubai real estate reached the bottom of a five-year decline? This is a topic upon which everyone has an opinion, but no one really knows with any certainty.

As I’ve written before, I’m not going to give my opinion - there are far too many pundits in the market - I’m going to present the facts It’s widely reported and recognised that home values in Dubai have reached record lows, as a result this has lowered the entry barrier for home owners to purchase their first property The accessibility to finance has become easier and also more affordable than ever before

Hot Potato: An issue or question about which people have different opinions and feel very strongly; a controversial situation that is awkward to deal with.

Has Dubai real estate reached the bottom of a five-year decline?  This is a topic upon which everyone has an opinion, but no one really knows with any certainty.  As I’ve written before, I’m not going to give my opinion – there are far too many pundits in the market, and I’m going to present the facts.  

It’s widely reported and recognised that home values in Dubai have reached record lows, as a result this has lowered the entry barrier for home owners to purchase their first property.  It has also created greater opportunity for social mobility with families, renting or buying, moving to communities once deemed beyond their budget.  With entry-level values now being within the reach of a greater audience this has fueled an increase in the number of home sales.  As is currently reported, repeatedly, the number of transactions being recorded by the Dubai Land Department has risen significantly.  Over the period of July, August and September the number of transactions reached a five-year high.  While recognising individual home values contracted year on year, the total value of property sold has increased – confirming greater numbers of apartments and villas are transacting.

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Not only have home values reached record levels of affordability, the accessibility to finance has become easier and also more affordable.  Redemption penalties applied to settling loans, once prohibitively expensive, have now become nominal charges.  Tailored mortgage products can minimise the amount of deposit, cash, which a buyer requires to enter the property market, thus their monthly rent payments are suddenly redirected to paying off their own mortgage.  There are significant numbers of long-term tenants who are now eyeing the property market, comparing their monthly rent to the monthly mortgage payments, and are now faced with the real opportunity of becoming a home owner.  These are some of the people who are fueling the proven, reported resurgence of real estate sales.  You may be one of these people, if not, you’re likely to know numerous.

In addition to the increased numbers of first-time home owners, investors are being presented with exponentially improved returns linked to holiday home lets.  Dubai has always enjoyed world leading hotel occupancy rates, we can now add to this the burgeoning market of short-term rental homes.  Returns within this space can be double compared to what investors have become accustomed to in a contracting rental market.  From an investors perspective, they have access to an asset at record low prices which can potentially deliver double the normal return and (utilising one of the numerous agencies) be a completely hands-off investment vehicle. These are also the people who are fueling the resurging market.

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The announcement of the real estate planning committee has added to the growing sentiment of positivity.  Dubai, more so than other global cities I’ve sold real estate in, reacts strongly to emotions, both positive and negative.  Expo 2020 is on the immediate horizon and the surge in population, albeit transient, will add significantly to the GDP, further fueling the feelgood factor.  In addition to the nebulous, soft rationale of emotional influence there is a glut of data based reports citing how and why Dubai real estate may be reaching its bedrock. In September the annual UBS Global Real Estate Bubble Index ranked the health of 24 major cities’ property.  Dubai narrowly missed the top spot, being classed as ‘fair value’.  What should also be noted is Dubai held this spot (#2 out of 24) last year; is one of only five cities to not be considered over valued and that it posted the strongest population growth of all cities surveyed.  

So, if we accept that homes are at record levels of affordability; and there are currently more homes being sold than at any other point during the last five years; and that there are sustainable reasons for first time buyers and investors to continue buying at similar levels; and that we are opening the door on the long awaited Expo ‘party’; and that Dubai is now one of a handful of ‘fair value’ global cities, I think we can assume demand for property is likely to continue, if not grow.  If demand continues to grow, so too will the expectations of sellers, and whether you agree or not, property will increase in value at some point, the only question is are we witnessing the start of that now? And there we have it, the hot potato. 

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