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According to a new Q2 report by the world's leading market research agency JLL, 7400 transactions were concluded in the first six months of the year in the sector of residential real estate in Dubai, which is almost 69% less than during the same period last year. In 2014, the first half brought 23,800 real estate transactions. These figures speak mainly of one thing: home buyers in Dubai have clearly taken a wait and see strategy. However, it is not so difficult to say, what they are waiting for. The fact is that 16,000 new units will be handed over in the second half of the year in Dubai — and this in addition to the 7900 units, brought to the market in the first half of the year. This means that property prices will continue to decline due to the predominance of supply over demand.
However, not all analysts share the same opinion regarding supply and demand balance. For example, Cluttons analysts recognize that the impact of 40,120 new projects launched by Dubai developers since the beginning of 2015 on the real estate market of the emirate will be significant, but it is likely only in the long term. In fact, it will take at least 10 years to build all these houses, and if the population of Dubai during this time will grow unabated, the demand will be almost always equal to the supply. “If you look at the pipeline and the projected population growth, they are quite easily matched”, the report said.
Another point that was noted by all analysts in their reports is the question of new real estate affordability, for the lion's share of all new property units, so massively brought to the market in the first half of 2015 accounted for this particular property segment. Areas, in which affordable housing is constructed, are mostly on the periphery of Dubai. These are locations like Dubai Silicon Oasis, Dubai World Central, as well as the well-known Town Square complex in Nshama area. Prices here are aimed at mid and low-income buyers, and, more importantly, at the real end users.
This is the factor, according to the experts of other agency Cavendish Maxwell, which determines the main fundamental difference between the current situation and the one that preceded the 2008 crisis. This is to say, that it is not just about stuffing the market with a huge number of "products" with no real understanding of who will buy it, it is a wise consideration and precise calculation, which has already started to prove its validity. In many respects it is also due to the new, unique and extremely favorable off-plan payment schemes. For example, last week compilation made by press showed that in some cases developers in Dubai can be so generous, that one can buy an off-plan property, paying only 5% as installment, and 70% upon completion.
Therefore, given these changes in the market, the desire of buyers to wait for even "better times" to buy property in Dubai, is understandable. However, not everyone can afford to wait too long: businessmen and tenants in Dubai, not so "spoiled" by options available, are going to pay the same rental price as before. According to different agencies, prices in the segment of office and retail real estate in Dubai did not change in the first half of the year, despite the fact that the amount of Gross Leasable Area in Dubai in the short and medium terms is expected to increase by 1.2 million square meters.
Anyway, as it was noted in JLL report, Dubai real estate market in the first half of the year remained one of the most volatile among all seven emirates, which was specific to it in recent years. And this is the fact almost all analysts agree with.
