Now it is true that the bulletin noted: 'The development of the Palms, Dubai Marina, Business Bay and Arabian Ranches, to name just a few, is clearly going to boost supply in the coming few five years in dramatic fashion. While the timing is uncertain, to us this suggests a decline in property prices is just a matter of time.'
But the document continued with the following rejoinder: 'That said those hoping for a collapse – that is those who decided not to buy three years ago – may be disappointed.
'First, the market is dominated by the top three developers who, assuming that cash flows allow, will likely cooperate with each other should the demand-supply equation change sharply in terms of pointing to significant price declines. And second, if this fails to halt a dramatic decline in prices, we would expect the authorities to use moral suasion to stabilize the situation. Therefore, the likelihood of a dramatic price correction appears relatively small.'
This is not the headline that appeared in some newspapers which chose to stress the shock-and-horror of lower prices rather than the heavily qualified view that a serious downshift in prices was not in prospect.
Prices up in January
Standard Chartered Bank's economist Steve Brice also acknowledged the significant factors presently supporting the booming property market, and published a new index showing that apartment prices rose by 10% in January while villas declined by 2.8%, an overall monthly average increase of 3.7%.
He noted the current demand/supply imbalance of property in Dubai thanks to a huge acceleration of economic activity; the liberalization of ownership rules; high rental yields with rents up as much as 40% in the past year; and the high liquidity provided by speculators in the market.
This is hardly a doom-and-gloom analysis. Mr. Brice winds up saying: 'In conclusion, it is difficult to argue with the fact that there are significant risks to property prices over the course of the next 2-3 years. However, we continue to expect any economic fallout to be limited.'
Potential buyers of Dubai property therefore have to take a view on the future, and for a long-term resident then paying a mortgage rather than rent may well still make sense rather than waiting for a dramatic collapse in property prices which may never happen.
Surely the first sign that the supply side of the equation is beginning to be addressed is in the news of project slowdowns this year, and a ban on new residential projects in the Dubailand theme park. Is this the first example of 'moral suasion' by the authorities that Mr. Brice warns us to expect?