Three years ago this column argued that the case for buying was overwhelming, both for investment and living. Prices have soared and rentals too; those who bought look happy. But for buyers today prices are higher and the rental outlook less sure. So what to do?
In 2005 the Dubai property market continued to see a lively turnover of completed homes, but price rises steadied considerably compared to the previous two years; and off-plan sales became much harder, with sales incentives of various types common, including negative premiums.
However, Dubai real estate prices remain very reasonable, indeed cheap by any international yardstick. Rental yields are double what is commonly found in similar, though more mature, global property markets. And actual property prices are still more than 50% cheaper in many cases.
Furthermore, Dubai inflation levels are currently very high and even wage packets for non-nationals are on the way up. Hence, if house prices are static in nominal terms then they are falling in real terms, allowing for the effect of inflation.
But at the end of the day, a decision to buy a property is a personal thing, and the answer on whether to buy is always a matter of considering your individual circumstances.
For somebody intending to make Dubai their long-term home then buying is down to three factors: saving on rent; using a house as a savings policy; and the pleasure of being able to do what you want with your own home, subject only to planning constraints.
The last factor is the hardest to assess objectively, as it is a subjective criteria. Some people love the idea of the Arabian Ranches, close to the desert and with an equestrian theme; others thrill to the idea of stepping from their Dubai Marina apartment on to the beach at the weekend.
On the other hand, from a pure investment point of view, it is now harder to make a case for buying Dubai property. There is a large oversupply of property of certain types – mainly middle to up-market apartments – due in 2007, and this is almost certain to lower rentals and at the very least keep nominal Dubai property prices contained at present levels.
Certainly the bonanza for speculators looks to be over, and flipping off-plan apartments is a thing of the past. But with so many of the developments ultimately controlled by the Dubai Government there is not likely to be a panic dumping of property on the market.
Those waiting for a property crash in Dubai could be just as disappointed as the speculators who bought late into the off-plan apartment scene. Then the person who buys now and plods away paying a mortgage will be the winner.
For eventually Dubai rentals will climb again, while mortgage payments should remain fairly steady, and high general inflation in the GCC due to the oil boom should take property prices higher in the long-run.
The day will surely dawn when Dubai property is priced at levels similar to other global hub cities, and that will be much higher in real terms than it is today.