Question: I am new to the Gulf region and am considering buying a property in Dubai. Real estate agents paint an amazing picture of the market’s future. However, I've noticed that there’s an unlimited supply of new properties being built, which makes me cautious.
After talking to friends, I feel one needs to stay watchful about the market potentially being overpriced. What’s your opinion on the property market in Dubai and the UAE in general? Is the market actually as strong as agents say, or should I exercise caution?
Also, considering that Dubai seems crowded and possibly steep, what would be your recommendations for upcoming areas in the UAE? Are places like Sharjah or others worth considering? MJ, Dubai
Answer: It’s easy to be swayed by any opinion, but you only have to look at the facts before making your own decisions.
For some time now, the Dubai property market has been riding on a crest of a positive wave that doesn’t seem to want to diminish anytime soon. It is becoming a speculator's dream to be able to time the market, but nobody knows how to do it.
Logically speaking, what goes up has to come down, but when I asked you to look at the facts, I was referring mainly to the population growth.
For some time now, the number of inbound residents has been larger than outbound, which means the population is growing faster than the number of units being delivered. The fact is that there are more people coming to make Dubai their home than the number of properties being handed over.
Then, add other positive factors such as the 10-year golden visa, the investor visa, the ease of doing business, business-friendly local and federal governments, zero income taxes, low corporate taxes, low VAT, safety, the economy and weather.
This is why the population is growing. It would be foolish of me to say that the property market will continue to go up, because there will come a period when house prices will stabilise. But as long as the net migration is greater than handover of properties, the status quo will continue for some time.
My prediction is that for the next two years at least, we will continue along this phase before we see any difference. If the population rises further than is currently growing at, this real estate bull run could go on beyond 2027.
Other emirates are developing their own real estate. Umm Al Quwain has Al Siniya islands, Ajman has Al Zorah, Sharjah has Arada and Ras Al Khaimah has Al Marjan and Al Hayat islands.
Q: One of my real estate friends told me that Dubai property is a bubble because the city is creating artificial supply. As the need for housing increases, more properties are created as long as there is land available.
But if you constantly keep building, eventually you’ll have more apartments than occupants or people may be outpriced, which is when prices will drop.
The city will then be dependent on completion of development projects to attract more tenants. Consider the type of people entering the country and their income bracket.
It’s ironic coming from a real estate agent, but his justification is that he’s only there to make money off commissions. Is this a bubble? GT, Dubai
A: Everyone is talking about a bubble. What they have to understand is that when economists talk about a bubble, it’s due to many factors.
I have been through two real estate downturns in Dubai. The first being the world financial crisis in 2008/09 that affected everyone and the real estate downturn of mid-2014, which lasted at least six years. What is different between then and now are the fundamentals. The reasons for the bull run are down to supply and demand and this imbalance is due to the sheer number of people wishing to make Dubai and the UAE their next home.
As long as the net migration of population continues, this buoyant real estate market is likely to last for two more years at least.
What goes up must come down and this might be possible in a few years’ time, but if it does happen, it won’t be a bubble that has burst, it will rather be a period of stability where prices neither go up nor down.
Having said this, if the population grows even higher than the current rate, we could see this real estate bull run go on for much further than just a couple of years.
To what your friend said about being here for the commissions, this is a sad state of affairs. Unfortunately, there are some individuals who think this way, and as a result, will bring the real estate sector into disrepute with shoddy work, bad advice and terrible service.
I would tell any potential client to do their due diligence and seek professional agents to work with.
The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario@novviproperties.com
