Home values surged 56% in the two years through 2013, but it's clear that now, the market is set to undergo a period of falling rents and prices.
The UAE government took steps to introduce measures that would help the market control itself in order to prevent a repeat of the 2008 crash. These regulations are now begin to take effect, coupled with falling oil prices and changes in global currency valuations.
They did the right thing and it had the desired effect because 2013 was pretty ridiculous in terms of price growth,” said Richard Paul, director of U.A.E. residential valuations at Cluttons in Dubai. “Landlords need to lower prices and buyers need to save for deposits. That can easily take 18 months to three years and we may see a subdued market.
Property prices in Dubai's secondary market are expected to soften this year, according to a Standard & Poor's Ratings Services report. However, the consultancy notes that this is a 'cool-down' of the market rather than a crash similar to 2008. The Reidin Housing Market Sentiment Index Survey found similar results, saying it expects a decline in the first quarter of this year.
Now, another factor that is bound to affect the property sector is that buyers from European countries are spending less because their currencies have declined against the dirham. In the past six months, the British pound lost about 8% against the dollar, the euro declined 15% and the Russian ruble slumped 42%.
Experts are cautioning industry players about changes that are bound to occur. It is apparent that the real estate sector is going to see a slow-down in terms of prices and rents. However, most analysts agree that this is welcome, bringing relief to the rapid growth that occurred in 2013. In fact, the falling prices is a good sign, Lenet Asatourian, a broker at ERE Homes, was quoted as saying. "This year, we're getting more inquiries than we did in the past six months and we have an equal number of buyers and sellers... To me, that signals a maturing market.