Is this a good time to sell my Dubai property?
Yes, it is as good a time as any, because Dubai’s housing market has witnessed a serious deflationary trend over the last few years. The fall in Dubai’s property market began in 2009, and the situation has gotten from bad to worse since then.
The decline has been arrested somewhat since 2014, but in 2015, we have seen rental incomes decline by 3 percent, which is a good indication of where we are headed in Dubai. There has been a general reduction in both, values as well as the volume of property transactions.
While over 20,000 new units are close to completion in Dubai this year, there hasn’t quite been the same demand for them as there used to be in the past. We expect the negative growth not only to continue, but to accelerate in 2016, largely because there is going to be an oversupply of new properties.
The decline in property prices in Dubai has been attributed largely to external factors. The decline in global oil prices – oil prices have come down to $42/barrel at the time of this writing – has been a huge blow to Dubai, as it is a city that has largely been built on the wealth generated by the U.A.E.’s oil exports.
The strength of the US Dollar as well as that of the British Pound, and the weakness of the Euro has made Dubai an expensive investment for European investors, who have always been the top investors in Dubai. In fact, this has led to a capital outflow as rich individuals in Dubai and the rest of the Middle East today prefer to invest in Spain, Portugal, France and other European countries, where properties can be bought for a real bargain.
Other factors are the EU enforced sanctions on Russia, and the uncertainty that prevails in the global currency markets. This has really affected the inbound as well as outbound flow of capital.
But this is not to say that the Dubai housing market is dead. Locations such as the popular Discovery Gardens and Dubai Marina continue to garner a lot of interest, which we expect to continue.
But generally, analysts predict a drop in property prices by 10 to 20 percent over the next 12 months, largely because of the glut of new supply. Faisal Durrani, who is an international research and business development manager at Cluttons, says, “At the moment, we’re seeing capital values continuing to modestly decline. It’s fair to say that there has been more resilience in the rental market than in sales. If yields continue to strengthen there will be an appetite to acquire – from buy-to-let and buy-to-live investors.”
John Stevens, is the managing director of Asteco Property Management. He is convinced that as 16,000 new units will be handed over to property buyers over the next 12 months, rental incomes in Dubai will decline further, especially in areas such as Dubailand, IMPZ and Jumeirah Village Circle.
Mr. Stevens says, “For Q3 and Q4, we don’t necessarily think that there will be an increase, but we don’t think we’ll see much of a fall, either. People are starting to think that property is becoming more affordable again, and that prices are not likely to fall much further. We don’t think there will be further falls, but what we do expect to see is a steep increase in transactional activity. As prices have dropped, more people are entering the market.”
What is clear is that Dubai’s days as the world’s top investment destination are behind it. We expect the dominant trend in the Dubai property market to be on the negative side.