Dubai has been an immensely popular investment destination over the past decade or so, especially where property is concerned. However, with the former meteoric rise in prices now slowing, many investors are unsure what they should make of the market right now and whether there is still any significant value to be gained from investing there.
The consensus among industry analysts and investors who are active in the emirate seems to be that Dubai remains a great place to invest in spite of being between boom periods at present. Indeed, Dubai’s exit from its latest boom phase has not by any means meant a catastrophic bust as was famously the case in the early stages of the financial crisis. Rather, it has resulted in a comparatively gentle dip in prices. This has not been entirely bad news, especially for investors just entering the emirate now or interested in expanding their exposure to Dubai.
The key positive to be drawn from Dubai’s current situation is that yields have not fallen in line with prices. As such, the softening of prices have meant that yields on new investments in the Dubai market have hardened considerably while the properties in question have grown more affordable. Indeed, yields now significantly beat those offered by many of the world’s other major property markets.
Furthermore, investors remain confident in the potential of properties in Dubai to deliver attractive levels of capital growth, and many seem keen to secure properties over the coming year while prices remain low. All markets are of course cyclical, but Dubai is especially noted for marked boom periods followed by slowdowns when the market begins to overheat. Many are therefore unconcerned by the relatively mild slowdown that Dubai is currently undergoing, which some have even welcomed as a way to let the market gather fresh steam rather than hit a more serious bust. Indeed, many investors believe that prices have already more-or-less reached their low points, and remain very optimistic about the potential of the next up stage of the cycle. With US$8.1 billion lined up in infrastructure investment over the next few years, ahead of Expo 2020, there are high hopes for the levels of capital growth that may come when the market once again surges forward.
Another key factor inspiring investor confidence in Dubai at present is its increasingly diverse economy. Previously Dubai’s economy was rather dependant on oil but, appreciating the dangers of this over-reliance on one industry, the emirate has been actively diversifying over recent years. Fully 96% of Dubai’s economy is now non-oil, with key industries including transport, construction, tourism and retail. This diversity has helped Dubai to remain resilient in the face of plummeting international oil prices where many other countries in the region, and even other emirates in the UAE, have suffered. It also inspires confidence for the future, as diversity is always an asset for an economy, with or without the specific set of situations that could have hit Dubai at present.