Hello, and welcome back to the Experience Invest blog, a chance for you to catch up on domestic and international residential investment news stories. Today we’re exploring the real estate market in Dubai, which according to recent research is maturing.
Property values in Dubai have been plagued by a cycle of boom and bust in recent years. Prices halved between 2008 and 2010, but by 2014 they had risen sharply again. The latest price increase encouraged the authorities to put regulations in place to reduce future speculation.
These regulations included capping mortgages and increasing transaction fees, which combined with other factors such as deteriorating oil prices, currency fluctuations, and an excess of new build supply in the region, resulted in a dip in the demand for properties in Dubai.
The net impact, according to the research, is a 12% fall in mainstream property prices over the last year to June 2015.
Lessons learnt from the downturn
Knight Frank, international real estate firm and author of the research believes the falling prices are not necessarily bad news. In their report they say: “With the government stepping in to curb speculative activity through tightening mortgage regulations and capping price increments, it is evident that lessons have been learnt from the 2008 downturn and the market is heading steadily to be more mature and better controlled.
“More interestingly, with price falls continuing to outpace rental value declines, initial yields are rising. Reaching more than 7% in rental yields in the mainstream property segment, Dubai still stands tall among real estate capitals in the world for investor seeking income generating properties.”
So what does this mean for the property market in the Middle East?
Despite the rise of alternative regional markets for international buyers, Knight Frank believes Dubai and Abu Dhabi will remain strong. It seems, investors, developers and governments are confident that there will be economic growth in both cities, which combined with a forecasted 20% increase in the UAE population by 2030, is positive news. While Dubai is emerging as an international airport hub.
Demand for Oman property from across the Middle East, India and Pakistan has risen in recent years, which Knight Frank believes is partly due to the potential for some buyers to secure residency following purchase, but also from relatively strong annual investment returns of about 6%.
Finally we’re seeing an evolving market in Saudi Arabia due to investment from Dubai-experienced developers.
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About Experience Invest
Experience Invest is a London-based independent property company specialising in residential investments, student property and care home investments. The company works with clients across the UK and internationally, and is regularly featured in the property news – see The Telegraph, on Yahoo Finance, and by Reuters for examples of recent articles.
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