With stock prices tumbling on Tuesday this week, the Dubai Government has issued its long-awaited property law which experts predict will mean a strong uptick in real estate prices that are well below those of comparable cities around the world. Plus former stock market investors now have cash to invest in property.
The Dubai Government's newly issued property law is as expected and gives non-GCC expatriates the right to acquire freehold and 99-year lease property in designated areas.
The new law will also allow expatriates who have already bought properties to register their titles with the Dubai Lands and Properties Department. In addition, GCC nationals now have the right to buy property anywhere in the emirate, opening up a new potential flow of funds into local property.
Dubai Financial Market fell to almost 60% off its all-time high reached last summer on Tuesday, and while the property law is clearly intended to prop up sagging local business confidence, its main impact will naturally be felt in the real estate sector itself.
Leading estate agents such as Asteco are on the record as predicting that a surge in buying will follow the new law. It is true that the missing legislation has held back some categories of foreign buyer and many expatriates will now feel more comfortable about buying.
However, the immediate impact of the new buyers will probably be most impressive in the re-sale market where the number of available properties is already somewhat short of demand. It remains to be seen whether renewed buyer enthusiasm will then overspill into the vast number of partly-completed apartments growing like mushrooms around the emirate.
But this should represent another leg to the Dubai property boom. How long it lasts and how big the impact will be on prices is hard to tell.
On the other hand, anyone who has been holding back to buy a property should now get on and do so, just in case the irrational exuberance of the local stock market is now transferred to the local real estate market.
Not all investors will have been losers in the Dubai Financial Market. Some will have cashed out with a substantial sum of money to invest. Where better to put that money than bricks-and-mortar which offers a very decent rental yield?
For by international standards – and Dubai is surely a city that should be judged by world benchmarks – property is still very fairly priced in Dubai. Moreover, the constant flow of expatriates working mainly for multinationals these days means a lively rental market will always exist.
Thus investors who choose to buy good properties in the best locations will not go far wrong, but they should always have in mind that an oversupply in two to three years' time is likely to interrupt this long-term uptrend, and plan accordingly.