The Current State of Dubai and What is in Store For Property Investors

When one considers Dubai’s property market, there are two very distinctive sides to the real estate market that should be considered separately…

There is the off plan property sector, which in the opinion of many property experts, the “near-term will see profit potential softening as the ability to realize profits from buying and flipping throughout the development process requires ongoing strong demand from other property investors for this sort of property stock - and that demand is just not as evident in the market as it once was.”

It is likely that high levels of straight investment into the off plan property market will diminish in the near future.

Alternatively, there is the established marketplace, which encompasses the resale and rental of completed property stock, and accordingly, due to the demand for property in Dubai, the levels of inward migration the emirate (as a whole) witnesses annually, ensures that this marketplace will continue to attract investors seeking immense profit potential.

One aspect, however, of major concern to the entire property sector in Dubai is ‘affordability’.

With the aid of better finance products for buyers and the fact that Dubai’s government has increased rental rate caps for tenants, the question of affordability can at least be maintained and kept at reasonable standards and rates.

Looking to the longer term, Dubai is in a position to support a “mature, well rounded property market which will be of longer term interest to investors rather than shorter term interest for speculators.”

A recent survey by DSL Exhibitions suggested that “Dubai’s residents feel the city has been inundated with luxury properties and there is greater need for more moderately priced property. Is this likely to have an impact on developers, and if so, what effect will this have on property prices and investors’ profits?”

This particular survey was poised to query a representative demographic conglomeration of Dubai’s population; there were a high number of UAE nationals (20%) and Indian nationals (60%) questioned in this survey, but neither group is currently being specifically targeted by the majority of developers in Dubai.

Although Dubai requires many more affordable housing units, it is highly unlikely that developers are going to target the more affordable end of the market, simply because there is no need for developers to do so. While there are still buyers snatching up the developments, it is obvious that developers have no need to accommodate other areas of the property market, also, why would they settle for less profit when far greater profits are guaranteed to developers through the construction and sale of luxury developments.

The Dubai government will need to enforce the construction and implementation of affordable housing. Should the government get involved in this, they will have limited direct impact on the luxury end of the market, as each end of the spectrum is of attraction to a different buyer types, investors and even developers.

Dubai’s political authority has a rather strong agenda. The government is on a mission to create a “sustainable, affluent and attractive multi-dimensional destination and if any situation arises to undermine the long term ambitions it holds for the emirate then it may well intervene.”

The fact that the government in Dubai has long term plans for Dubai and its surrounds; surely indicates the incredibly ambitious nature of the current Dubai government.

The recent governmental intervention by capping the rental return rates, to ensure the prevention of rental rates spiralling out of control, was a decision which was long considered by the Dubai political authorities.

By increasing the rental rates caps, the government has ensured they protect its residents and citizens, as well as protecting the Dubai economy whilst pulling the rein in on inflation.

Investors should make a consorted effort to understand the government’s objectives, principles and vision, and should definitely not fear the government in Dubai, and its agendas.

According to most property experts, “Anyone now looking to enter the property marketplace in Dubai would be best advised to consider committing to the long term for attractive rental yields and steady property price appreciation. Those who wish to realise immediate income should purchase well located resale or completed apartment stock in the vicinity of the central business locations or townhouses and villas in attractive residential communities and/or within easy distance of international schools.”

All in all, one can safely assume that Dubai is most definitely an economy and property sector worth investing in, in the long term and short term.