You will remember in our “Dubai Property News” bulletin in April 2012 that we predicted significant price increases due to supply/demand we were seeing first hand in the property market (despite the corporate ‘analysts’ at the time still predicting further price reductions – their information is always out of date)
Our belief now is that the 2nd Dubai Property Boom HAS Started. And please remember – We told you this first!
Up to now the recent price increases have mainly affected the high end of the market and Villas. But now the rises are filtering through to the low end of the market which will see significant price increases over the next few months.
Here are ACTUAL examples of Property Price increases over past 6 months since April 2012
Villa Prices – These have increased average of 30%
Springs 2-Bed Villas have risen from AED 1m to AED 1.5m
JVT Townhouse Villas have risen from AED 1.1m to AED 1.6m
Jumeirah Village 2-Bed Detached Villas have risen from AED 1.4m to AED 1.9m
Meadows 3-bed villas have risen from AED 2.7m to AED 3.5m
Arabian Ranches 4 –bed villas have risen from AED 3.4m to AED 4.1m
Green Community 5-bed Family Villas have risen from 2.8m to 3.6m
High End Apartment Prices have increased over 25%
Dubai Marina: Average 2-Bed has risen from AED 900,000 to AED 1.2m
Palm Jumeirah: Average 2-Bed has risen from AED 1.2m to AED 1.5m
Business Bay: Average 1-Bed has risen from AED 600,000 to AED 800,000
Jumeirah Lakes Towers: Average 3-Bed AED 1.2m to AED 1.5m
Low cost Studios and 1-Beds have increased over 10% … but further rises are imminent.
Prices on our own investment offers will on average increase by about 3% on 17th September and then again by a similar amount on 1st October. From an investment point of view, rents are also going up – so the net investment returns are the similar with rental yield of 10% of property price for these investment properties.
So – as we said before – If you were thinking of buying – Do your research now and buy.
Will it be another Boom and then Bust?
It could be – but most people have learnt a lot since then; and chances of this happening are much less.
The difference is that now there is real demand and we are dealing with real ‘ready’ properties – previously the boom was mainly related to ‘off-plan’ virtual properties. Prices crashed when investors lost confidence as builders stopped building and investors stopped paying. This panic led to rapid decrease in prices.
The most likely scenario is that prices will rise rapidly over the next 12 months, reach the 2008 peak levels and then plateau or grow slowly. Developers will also work harder to complete their buildings and this will also help to reduce further price inflation. However we do expect some people to exit the market when prices are at the peak 2008 levels.
So -Why Are Dubai Prices Rising?
After massive price falls in Q4 2008 and early 2009, and then 3 years of relative stability- why have prices started to rise again?
There is a real increase in demand for property which is being driven by the rise in populations and tourism.
Population Increasing: In line with general GDP increase (5% GDP) the population is increasing at a similar rate to before the crash.
Tourism Up: Dubai is once again on target to be the world’s leading airport hub.
Safe Haven Status in Middle East: With uncertainty in other areas of the Middle East, Dubai has become an attractive destination for many Arabs.
Contrary to popular belief, Dubai actually has very few “ready” properties compared with other major cities in the world. The impression many people have is that Dubai is overflowing with ready properties – this is not correct.
2.Limited Supply of Ready Properties
Many projects were cancelled or were stalled after the financial crash. Although many of the stalled projects have now re-started construction, there is still likely to be shortages in the future. Currently developers can NOT get funding upfront from investors or banks – so there are no new projects being launched. In the past people were willing to buy ‘off-plan’ – this is no longer the case and customers only want to consider ‘ready’ property.
Most of the projects under construction or planned are the more expensive mid to high end properties. Thus demand for lower cost property will show a proportionately higher rise. Thus for investment low cost Studio and 1-bed apartments are the best right now.
3.Return of Confidence in Dubai
High GDP: This is now one of the highest in the world and much better than Europe and USA
Progress on Infrastructure: Investment into infrastructure has continued and future plans to expand the Metro and Airports are once again on course.
Becoming a Financial centre and Business Hub
4.Seller Price Rise Awareness
This causes what we call ‘positive feedback’. Currently sellers have been selling their properties below their purchase prices and have been losing money. Because sellers know that prices are now rising – they become reluctant to sell. Similarly buyers become keener to buy as they know prices are rising. This results in comparatively fewer sellers and more buyers thus fuelling price rises on a monthly basis.
In summary, the message is that if you have decided not to invest in Dubai – ignore this email. If you are looking to buy a property – from which ever estate agent, then do it soon.