Falling Prices an opportunity for Dubai property investment?

By: Cathal Leonard
Cathal Leonard
Cathal is a land and property marketer with knowledge of both UK and emerging property markets. Cathal uses his… read more.
on Jan 29, 2015

Having remained stagnant for all of the latter half of 2014, Dubai’s property market is finally expected to see a degree of deflation, particularly on properties at the periphery of the city, with prime properties in the center and around the marina expected to be more resilient.

We’ve reached the peak of prices for residential in Dubai and that’s a good thing. We are at the top of the cycle now and we believe that both prices and rents will decline this year,” said Craig Plumb, the head of research at JLL’s Dubai office.
The fact that the Dubai currency, the dirham, is pegged to the dollar, has had an adverse effect in property investor sentiment coming from Russia and Europe. The Dubai Land Department also reported a 15% fall in the volume of completed real estate deals that occurred in 2014, when compared to the previous year. JLL expects a drop in property prices of about 10%, yet it could potentially be a more significant drop than that because major increases in the price of housing up to June 2014 show that the market was highly inflated.

“House prices rose 56 per cent in the two years to June 2014 and Dubai was pricing itself out and becoming too expensive to live and to work here,” Mr. Plumb said.
There are 20,000 houses expected to become available over the next year in Dubai adding to speculation that increased supply will contribute towards residential property prices falling throughout 2015.
Several other factors may yet contribute to a further fall in Dubai real estate, factors which are difficult quantify in terms of their degree of influence over Dubai’s property market.

Firstly both the EU and the US are considering further sanctions on Russia due to the continuing unrest in the Ukraine, potentially devaluing the ruble further. Secondly, the Euro currency looks like it may be in for yet another tough year as quantitative easing begins and the “Greece situation” develops. That being said, if trends continue, UK and US property investors may very well find that Dubai is the place to get surprising value for money in 2015. The property market in Dubai is more mature than in 2008 and a bubble-style crash is not expected. For investors interested in property in the Emirate the trick will be anticipating the basin of an easing of prices.

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