Dubai is now seeing a correction in house prices, because things had reached a point where it was becoming too expensive to live and work here. Dubai's real estate market has come a long way since the crash in 2008.
In 2013, property values shot up once again with rents creeping up in prime locations. This year, however, that market is set to see some drastic changes. Since the end of last year the market has shown signs of stabiliisng. Now, most real estate experts predict that this year will see rentals falling by 5-10%.
Real estate consultancy JLL Mena is quick to note that this time will be different from 2008 though, because developers are definitely "being smarter second time around." JLL's forcast is similar to the 2015 predictions made by property group CBRE, which said that the arrival of new units on the market this year could have a deflationary impact on sales and rental rates.
Prices had risen too high with house prices rising 56% in the two years to June 2014. Dubai is now seeing a correction in house prices, because things had reached a point where it was becoming too expensive to live and work here. Besides the UAE government's efforts to correct market prices through a series of regulatory actions, the real estate sector will also be affected by declining oil prices, according to a top ratings agency. Standard & Poor expects the realty market to suffer from increased supply and weakening sentiment, triggered by the tumbling price of oil. The residential market is set to absorb 25,000 new units this year.
This year will definitely see the realty market undergoing changes. The real estate sector is stabilising and house prices are set to decline. However, it is apparent that these changes will not be seen across the board because primary locations will not be as affected as other areas. "We've reached the peak of prices for residential in Dubai and that's a good thing. We are at the top of the cycle now and we believe that both prices and rents will decline this year," said Craig Plumb, the head of research at JLL's Dubai office.