This is a dilemma for many potential buyers. Caution suggests a wait-and-see approach might deliver a bargain in a market correction. But fortune favours the brave, and you could miss out if you hang around.
Those who could have bought Dubai property two years ago, and did not are already kicking themselves.
Of course not everyone would have seen the price of their villa double as on The Palm, Jumeirah with just a 10% down payment. However, initial buyers of Meadows villas, for example, have enjoyed 30-50% price gains with a 20% deposit.
Now the question is: Have prices now leveled off? Or will they go up further?
There seems no reason to believe that prices will stop rising, although perhaps not as rapidly as in the past two years.
First, there is more supply coming on stream, though not enough yet to keep up with the expansion of Dubai. Secondly, there is no shortage of investors with cash and finance for would-be buyers at affordable rates.
House prices are also still at very reasonable levels by international standards. The Meadows villas in Phase Four, for instance, presently sell for around $143 per square foot compared with $91 per square foot on handover. A similar home in a top location in London would be around ten times as much.
Now the 'wait-and-see' potential buyer has already missed out. The argument for waiting longer only holds if there is a market correction coming in the near future. Otherwise the potential upside will more than compensate for a downturn, when it happens.
The problem with real estate downturns is that they can be elusive. They do always happen eventually, but that could be five or ten years away – particularly for a booming economy like Dubai.
Moreover, in that time somebody living in Dubai will have paid a fortune in rent. Indeed, this rent could have been much better spent paying the mortgage on a property that will not only have saved this rent as a nest-egg for the future, but will probably have gone up in value as well.
Look at this another way, if you accept that Dubai house prices are very reasonable by world standards, then you would also have to accept that buying a home anywhere else also makes no sense whatsoever. Perhaps real estate is about to trip into a universal bear market but most people have a good experience with property investment over time.
For one thing the mortgage payment is an enforced savings plan, something you might not otherwise do. For another, home prices do tend to rise over a long period, providing valuable capital appreciation.
Some people still argue that the legal position of ownership is not clear enough yet in Dubai. It is true, an expatriate buyer does not get a document with a legal title, but there is nothing to prevent you buying, selling or letting your property, and thousands already do. Possession is nine-tenths of the law, and a legal title is more about what you can do rather than the piece of paper in your hand.
So is there a good argument for waiting for a downturn in Dubai property? If you are paying rent in the city and plan to stay for sometime, then almost certainly not. If you are a speculator sitting on a cash-pile you might ask whether the yield is high enough at the moment to justify your investment.
However, with the outlook for equities and bonds not too bright for 2005, it is hardly surprising that many choose bricks-and-mortar as a solid investment. Rents are also rising.