Abu Dhabi / Emirates Business
While reports from developers and analysts indicate Dubaiâ€™s real estate market is down, experts on the ground are confirming transactions are up and the state of the market is in line with expectations.
Figures released by Allsopp & Allsopp, one of the UAEâ€™s leading property agents, show transactions for 2016 are up 18 per cent on the same period last year, and month-on-month growth over the last 12 months has increased by 12 per cent.
These figures support data released by Dubai Land Department last week showing more than Dh68 billion of deals was struck in the first 53 days
of 2016, while the department predicts a total Dh300 billion ($81.6 billion)
of transactions over the course of
Allsopp & Allsoppâ€™s CEO, Lewis Allsopp, said: â€œThere are two distinct property markets in Dubai â€“ the investment market and the end-user market. While the investment market is constantly analysed and discussed in media, and yes prices are down, itâ€™s a fact transactions are up, especially in the end-user market.
â€œWhat weâ€™re seeing here is the evolution of a mature property market, where people are buying homes to live in after renting for a few years, then going on to sell those homes and upgrade to larger properties, creating a mature property cycle. Itâ€™s a fact people are buying homes.â€
THE RELEVANCE OF OIL PRICES
Allsopp says, while oil prices have a macro effect on markets and play a major role in the dynamics of the region, he questions the effect this has on the retail property market.
â€œItâ€™s important when talking publicly about the property market we segregate the markets into investment and off plan sectors versus end users and ready properties. Oil plays a bigger factor in the investment market, as like oil, gold and many other investments, property, especially an off plan purchase, is generally motivated by turning a profit. Based on the conversations and speculation weâ€™re currently seeing in the market itâ€™s no surprise investors are holding back to see how markets react.â€
Allsopp claims the end user market deserves more attention, as itâ€™s a large part of the sector and the economy as a whole that is often overlooked when analysing market conditions.
â€œHow does the oil price affect someone who works in IT? How does it affect a teacher or someone who works in media? I believe the oil price will have little or any effect on such people who are purchasing property to live in â€“ and the numbers back this up. These are people who are buying because theyâ€™re in the next phase of life and buying a home for their family is the logical step to take. Maybe they need the extra bedroom because theyâ€™re expecting a child, or maybe they are downgrading or moving to another area to be closer to schools or work. None of these reasons will deter the decision to purchase a new home based on the oil price.â€
WHY HAS THE MARKET DIPPED IN 2015?
Allsopp points to regulations and measures put in place by the Dubai government after 2008 to prevent another bubble and major correction.
Loan to value rates were decreased to 65 per cent for purchases over Dh5 million, meaning buyers need to have over a third of the propertyâ€™s value in cash to buy a property. Off plan buyers are asked to pay an additional registration fee of 4 per cent of the contract value at the time of booking and increased transfer fees of 4 per cent, up from 2 per cent previously when buying from a developer, were also enacted around the same time, which has added to the cooling measures.
â€œThese measures were put in place for a reason and they are doing the job theyâ€™re supposed to do, which is to stabilise the market and prevent another bubble. What weâ€™re seeing now with the decrease in sale prices is the result of a regulated market acting as it should. The fact weâ€™re seeing an increase in sale transactions is further proof of this.â€
ARE PRICES GOING TO COME DOWN FOR TENANTS?
In theory rental prices should fall in parallel with a dip in purchase price. However prices over the last 18 months show there has been little effect on rental prices.
â€œOne of the major factors to take into consideration is that while many tenants might start looking for new rental properties, once they realise the hidden costs of moving outweigh any potential savings, theyâ€™re not moving.
As a result, the majority of rentals
are being renewed and this keeps prices stable.
Allsopp adds that with vacant properties, where in other markets you would expect landlords need to fill them urgently, most landlords in Dubai are not constrained by financial obligations and would rather see the property sit empty than let them fall below their own perceived market value. â€œAs far as Iâ€™m aware, this is a situation wholly unique to Dubai,â€ he says.