2015 - A challenging year for Dubai Real Estate

The current has been a challenging period for Dubai Real Estate as property transactions declined and property prices dropped, apartment prices have dropped around 12% at the end of the 3rd quarter. This drop in property prices is expected to stay at least till the coming few months, experts believe. The property start falling after the land lard imposed a mortgage cap and increased the transfer fee, these efforts worked well to cool down the market but at the same time some external factors like a drop in oil price, property fluctuations and new inventory that is on the way to release. The new inventory of property has been exaggerated and developers are now looking to release new inventory of properties which is in line with the absorption rate of the current market. 

This is a good move to regulate the supply and demand fundamental and will also help to stabilize the property market in the longer run. On the other hand rental prices have not seen any major fall and seem to relatively stagnant or have fallen by a negligible percentage. This is welcomed news for buy to let investors as they can now pay less to buy property and get the same rental yields as in the peak time of the real estate market. Though sales and rental prices are driven by different factors one common factor is the supply and demand level. 
Rental prices are mainly affected by this phenomenon while as sales prices are decided by a number of factors put together which include economic growth, supply demand, investor’s sentiment, interest rates and currency fluctuations. 

Amid the slowdown Dubai developers are optimistic about the things to turn positive as work starts on infrastructure projects for the EXPO 2020, major projects have been lined up for this mega event which is expected to bring a huge number of visitors to the country and create jobs for accomplishment of infrastructure projects. The new projects around the site of the EXPO 2020 will extend the city to a larger extent and new residential and business opportunities will be created. 

Other major off plan projects are also underway with some of them as iconic as previous ones and other that will be a huge than what Dubai Real Estate market has witnessed so far, these new developments will further add to the amazing skyline of the city and is expected to bring investors as the city gears up for the Expo 2020.

The government is also emphasizing on affordable housing which is a huge need of the real estate market as majority of the population in Dubai are away from being landlords due to affordability reasons. Affordable housing will open a new segment and will bring the mid-income earners into the property scene this can have a huge impact on the local demand and open a new line of products for investors which can be a prolific investment looking at the influx of people into the country. Affordable housing will also lower the pressure on the city road and train infrastructure as people can choose to live near to the workplace and this can help in the overall economic growth of the country.

Clear optimism amid falling prices

Property prices are falling since the start of 2015 and continue to fall in the 3rd quarter. There is also a decline in sales transactions within the real estate sector. In Q3 2015 apartment prices fell by 3 percent compared to the second quarter. Villa prices have also reported a downfall in the first half of 2015. Rental prices are however not seen any major fall, a mere 1% decline has been reported in Q3 of 2025 which is a negligible number.

Sales are rental prices do not necessarily follow the same trend as there are different factors influencing the two. Prices depend on supply- demand, investor sentiment, economic growth and various factors while as rental prices majorly depend on the supply demand fundamental. The market is going through a challenging phase as investors are adopting a wait and watch approach.

This slowdown can be a beneficial time to buy for investors as in this state of the market investors can get some good deals, the investors are still waiting as they wait for the prices to come further down and buy property at the lowest price possible. There are some major projects underway and a lot of residential inventory to  be released, though the actual number of the inventory has been exaggerated, developers are also looking into the possibility of delaying the release to create a balance between supply and demand and the market gets enough time to absorb the currently available inventory. 

The current slowdown indicates a correction which has been triggered by efforts made by the government and the Land apartment, these include the federal mortgage cap and doubling the transfer fee, and these efforts have been successful in eradicating speculations and flipping of market that results in over heating of the market. After implementing these cooling measures the slowdown was expected however certain external factors also affected it a little further. 

Despite of the slowdown the real estate sector is positive of an upward trend as the infrastructure projects needed for EXPO 2020 will create a huge number of jobs and other positive factors like the influx of capital from troubled countries in the region will help the real estate sector create more activity.