Property prices started to fall in Australia early last year and by the autumn weakness was evident in the UK and Spain. Only continued low mortgage rates sustain the market in the US which looks next for a fall. Against such a background how will property in Dubai fare?
Estate agents in Dubai have reported an unexpectedly quiet January which might be partly explained by a more sober international appetite for real estate this year.
It could be that the foreign buyers now have less cash, or are having difficulty unwinding their positions in other markets and so can not buy in Dubai. On the other hand, money that was to be invested in Florida or Knightsbridge might now be on its way to buy into one of the Palm Island developments in Dubai, or an apartment overlooking the Emirates Golf Club.
However, it is hard to get a handle on just how important money from non-Gulf markets is in the Dubai property market. Certainly agents speak off-the-record about some substantial multimillion dollar investment portfolios being sold in the UK, for example, for re-investment in Dubai. But whether this is anything like as significant as Saudi and Kuwaiti money is difficult to say, let alone UAE nationals.
However, a cooler international realty market is probably likely to have a dampening effect on the booming Dubai property sector. If nothing else the feeling that 'investing in property is always a winner' is dead, although such a foolish notion does the market no good in any case and a degree of consolidation would be no bad thing after a very bullish run of over a year.
The big developers have been trying to beat the speculators in Dubai since last autumn by demanding more money up front, one way or another. This is also undoubtedly a factor in calming down the Dubai property boom, and is a very healthy thing.
When a speculator can put down a 10% deposit and then double his or her money by selling a few days later, this is a classic investment bubble situation. Sooner or later somebody will put down 10% with borrowed money and then be unable to sell, and face personal bankruptcy. So squeezing these people out of the market is good all round.
More likely the Dubai property market will now enter a more workmanlike phase with new developments selling in a matter of months rather than a few hours. In this market people will be looking for homes to live in or rent-out, not to pass on to another buyer.
This should also result in a slowdown in new property projects. However, with oil prices close to $50 a barrel investors will continue to seek out good investment opportunities, and until rental yields come off – something that can only happen when property is actually completed – the Dubai property market is unlikely to come unstuck.
Hence for buyers with a long-term view Dubai continues to offer spacious property at prices that are unbelievably low in comparison with other comparable population centres. If you want to buy a home there is not much reason to delay in these circumstances, especially if you are already paying very high rents in Dubai which could be paying off a mortgage.