Dubai real estate is enjoying a resurgence in property values, thanks to the age-old economic dynamic of supply and demand.
But the property market has matured from an investor-driven, off-plan flipping, 10% month-on-month value rise environment which Nick Grassick, managing partner, ph Real Estate, witnessed 13 years ago.
Now it’s the homeowner, mortgage-backed family abode marketplace everyone is trying to call home. But with a demand boom comes little room to negotiate and hiccups with tenants happy to stay where they are.
In order to understand Dubai’s property market dynamics, we had a talk with Grassick, and asked the following:
1- Is there a supply glut or not in Dubai? (Numbers about supply range from 37,000 to 62,000 units by end of 2021)
“There may be a continuous supply of new properties, but this doesn’t impact the mature, established communities, where there is a finite number of homes. Most established communities within Dubai (with established civil and social infrastructure) offer very little, if at all, opportunity to develop additional homes. It is within these more established communities we are finding the most demand.”
2- Is demand bigger than supply now? What are demand figures for apartments, homes, villas in Q1 2021 compared to 2020 and 2019?
Demand is considerably greater than supply and has been for nearly a year now, and this is what is fueling the incredible price surge witnessed across most, if not all, Dubai communities. Year on year, we are registering nearly double the number of buyers and tenants. It’s almost unconscionable to think where the UAE was a year ago, both in terms of the property market and the economy as a whole.
3- Who are the top buyers representing demand today?
The home buyer sector is largely made up of long-term tenants, to whom Dubai is already called home. Over a number of years, long-term tenants have seen property prices contract to record lows last year, but they’re now witnessing the rapid expansion of those values and recognize the importance of owning the property they live in.
The reduced deposit required to purchase, coupled with incredibly attractive interest rates, completes the perfect storm. In a dynamic, shifting, market you’ll always find investors trying to find an opportunity, be that short-term capital gain or long-term recurring returns. Investors who know Dubai will remember the last time prices surged like they currently are, and they’ll remember that rally lasted for three years, and they’ll be asking themselves if we are mere months into a similar rally that may stretch for yet another couple of years.
4- Is Dubai witnessing a real estate revival? A demand and price boom?
Most definitely. We are currently marketing and selling homes at near double the values they were purchased from us while in lockdown 12 months ago. It is the norm to find multiple buyers vying for the same property, and multiple bids invariably result in asking price offers being secured, and in some instances, homes are being sold for values greater than the asking price. We specialize in all of the mature, established, expat communities and all of these are enjoying a demand and price boom.
5- What are the economic and/or geopolitical threats facing the property sector in Dubai?
There are many frailties that could affect the UAE economy right now, but fortunately, the government has proven it knows how to navigate them in the past. The Middle East has always been a delicate part of the world that requires a light touch when dealing with geopolitics. Fortunately, the UAE, and more specifically Dubai, has always been considered a safe haven for investment and assets. The other obvious threat is COVID-19, but with a world-leading performance relating to the pace and coverage of rolling out vaccinations, I believe we’ll continue to weather that particular storm with confidence.
6- Are prices negotiable? Is there room for haggling on either sales or rent agreements?
This is always subject to the personal circumstances of the owner, be they seller or landlord. If someone is in need of a tenant or the money held within their property, they will naturally be more flexible. At a macro level, it’s reasonable to recognize there is very little negotiation available when property values are rising. We respect a buyer or tenant will have a limit of what they believe a property is worth, but that’s not to say the next person who views it won’t attach a greater value to it, and in a rising market, this is normally the case.
7- Is buying off-plan still a good and safe strategy today to flip it for returns? Is there room for speculation in Dubai?
Buying off-plan is still considered a good and safe strategy if you have completed your homework regarding the developer and the project. A decade ago, the DLD and RERA implemented a much more robust structure regarding off-plan developments, so the mechanics surrounding your cash and when and how it’s used are assured. Also introduced a number of years ago were restrictions surrounding the ability to flip properties and the requirements of the developer before an NOC will be issued, and this may stifle the investor who is looking for a very short-term flip gain, which is a good thing for the sustainability of the market.
8- Have the priorities of buyers changed after COVID-19?
Very much so, outdoor space, proximity to social and leisure amenities, social infrastructure including retail, educational, and healthcare all top the revised list of buyer’s priorities. Fortunately, most of the mature communities we cover now provide ample options for a much more discerning buyer.
9- What about home sales with tenants living there?
This is the reason why I chose this very topic for my recent article; it genuinely is becoming the most difficult piece of the puzzle to complete. Given there is such a short supply of homes for both buyers, and as importantly tenants, it proves occupancy levels are at record highs. In a market with such strict restrictions regarding serving tenants a notice, it seems incredulous to expect to find your dream home, vacant, waiting for you.
10- What are the options with homes that have tenants living there?
If the property is occupied, an incentive is required to entice the tenant to vacate early. This incentive is required to offset the expense of moving, removal company, brokerage commission, time off work/inconvenience, and that’s before you factor in the increase in rent the tenant may incur because rents have increased since they started their own lease. If you purchase a home with an incumbent tenant, and they refuse to leave, you’re required to serve a notarized 12-months vacating notice. Completed in the correct manner, this will ensure you know a date when you can occupy your new family home. Until that date, you simply continue to enjoy your existing family home!