Huge market changes predicted
Investors in Dubai's real estate market and stock market have been enjoying huge returns since 2013 when the emirate bounced back from its financial slump.
Last year, the Dubai Financial Market General Index grew a dizzying 88.3%, but this figure has fallen in recent months as investors run for cover following large losses at construction giant Arabtec. Now, doubts are starting to creep back in. With residential prices leaping 51% in 2013, many fear the market is overheating.
However, despite the current panic, the underlying property market in the UAE remains in good health, says Warren Philliskirk, associate director at Mortgage International Business in Dubai.
Speculators have been driven out by new rules aimed at preventing speculation, such as the UAE Central Bank's recent demand that buyers put down bigger deposits and the Dubai Land Department double transaction fees from 2%-4%. "Now most buyers are end-users, people who plan to live in the property themselves, rather than looking to make a quick profit. This should make the market much less volatile," says Philliskirk.
According to him, we're looking at a steady growth of 5% a year and the slower growth should help avoid a repeat of the 2008 crash. However, he notes that a market correction is not completely impossible either and that while there might be a bit of a bumpy ride in the short-term, the market will correct itself within a decade.
The Dubai Financial Market suffered a mini-crash after weeks of problems with construction giant Arabtec's stocks. Shares in the stock exchange, leaving them down 25% from their May peak. To address questions, Arabtec finally held a press conference on Wednesday, assuring investors that there will be no change with the projects. "We terminated a few contracts but there is no change," said Khadem Al Qubaisi, chairman. "The projects will continue and we will replace people with construction professionals... Construction is the backbone of this company."
Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. The real estate market has been going through a shaky period what with Arabtec's falling shares and an oversupply of property. Analysts agree that while the next few months may be rocky, the market will eventually correct itself - avoiding a repeat of the 2008 crash. In fact, according to Peter Cooper, editor, Arabianmoney.net, one should expect a 20-30% correction in Dubai's future. "The outlook for the real estate sector in the UAE and Dubai is positive and this is mainly due to the strong economic growth experienced since 2012," adds Ziad El Chaar, managing director, DAMAC Propeerties.