Cautious optimism in air
After the financial crisis of 2008-2009, the fact that real estate prices have been on the rise has been perceived by most as a sign that the market has recovered. However, a few experts are concerned that the ever-increasing prices could lead to another fake property price bubble.
According to a recent report, residential capital values have risen by close to a third in the first six months of 2013. Yet, what others stress is that while prices have gone up significantly, they are still 31% below the market peak of 2008.
Additionally, researchers have found that more residents are now interested in purchasing a home rather than renting and hopping from one apartment to the other. For those living in the region, Dubai is perceived as a relatively "safe haven" and has been attracting attention from those looking for a permanent home rather than simply as a means for investment.
Another factor to note is the emirate's keen efforts on the regulatory scenario, where major changes are expected to be seen by 2015. Dubai's latest decree on setting up a committee to resolve the fate of cancelled projects addresses one of the most pressing concerns investors have had. There is also the Real Estate Investor Protection Law, which has been drafted to protect investors if developers fail to complete or handover a project within a set timeframe.
While further hikes can result in a property bubble similar to what caused the last crash, there is greater awareness this time around. Even last year, the UAE Central Bank tried to introduce measures to curb speculation and it is expected to come out with a set of lending limits later this year. Another suggestion has come from the International Monetary Fund (IMF) to increase levies on real estate activity. Fees on transactions are currently set at two per cent.
Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. We know that it's a tricky time for investors, who are unsure of the market's stability. However, we hope that our round-up of stories and expert opinions has shed some light on what the future holds for Dubai. Be sure to catch our next issue to know more about new industry trends.