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Winning paradoxes for Dubai real estate

17.07.2015
Winning paradoxes for Dubai real estate
Two year quarters behind Dubai real estate market analysts began to realize what leverages were setting it in motion all that time, and what real market shape can now be seen at this general background. So far the market was full of paradoxes. What they are and what advantages they bring, you can read in our digest.

A global real estate market study conducted by Emirates NBD, the results of which were published by Markit last week, found that more than half of the brokers have noted a serious surge in the rental market activity, and only 13% of surveyors recorded a decline in tenants’ interest. In the sales segment 41% of agents witnessed an increase in rental demand, and only 18% reported a decline.

“The concerns regarding the property market slowdown have somewhat been – to put them squarely – exaggerated and inflated. We have maintained for some time now that the market is undergoing a much-needed easing that would help it paddle away from troubled speculative waters”, said the report.

The same is confirmed by another recent report by analytical web-portal Bayut, which showed that amid general prices decline in property sales and rental segments in Dubai, some areas, on the contrary, showed an increase in prices. While overall prices in the sales segment fell, according to Bayut, by 5-10%, and rentals declined by 5-6% per year, some areas saw rental increase by as much as 13% during six months. And the reason for this was overall real estate market expansion.

Thus we see a winning paradox, favorable mostly for property buyers: the more sales and rental prices decrease, the more developers and landlords are turning towards affordable housing and rentals, and overall increasing property market supply prevents the market from slumping too fast. In addition, affordable housing creates a higher demand for it, and demand then causes a rise in rental prices.

Here is an example of such a paradox: according to Tasweek, Dubai Silicon Oasis and Discovery Gardens took second and third places in the ranking of the most affordable Dubai districts for rent. A studio apartment here can cost an average of US $ 12,800- 15,000 per year, one-bedroom apartment – about US $ 18,200 - 20,000 per year. At the same time, according to Bayut, these areas over past six months recorded the most significant rise in rental prices — by 13%. Thus, those housing prices in Dubai, which are still going down, were initially too high, and the market just corrects itself. “The strongest factor that remains in play is that the market is adjusting to shed off the excessive weight of prices it put on as the values rose over the past few years,” the report by Bayut said.

According to another report by Asteco, published last week, luxury real estate Dubai locations such as Palm Jumeirah and Jumeirah Beach Residence witnessed a decrease in rental prices by 6% and 7% quarter-on-quarter, respectively.

Thus, if talking about the average indicators, we should point out that at the moment they are the least representative factor of Dubai real estate market development, so the basic analysis of the events yet to come.

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