Dubai realty slowdown “not negative” despite sales decrease
Property sales in Dubai continue to decline in Q3 2015, with rates down by two per cent from the previous quarter. This represents an overall fall of six per cent year-on-year, according CBRE’s latest Dubai Market Update for Q3 2015.
Dubai has been experiencing a slowdown since H2 2014, with transactions as well as transaction values declining, and drops witnessed in both rental and sales rates. However, Erik Volkers, senior consultant at CBRE Middle East, explains that this slowdown “has not been as negative as people say”.
“There has been definitely been a slowdown, [especially] compared to the double-digit growth we’ve seen in 2013 and even before that. But, for me, it is really healthy,” he says, explaining that the market is slowly stabilising, but, “if we [had] continued with the double-digit growth, I think we would be heading [for] another boom, where things might’ve crashed again for us.”
CBRE expects the slowdown to continue for the next 12 months, with improvements in market growth expected through a huge incoming supply – an estimated 70,000 new residential units will enter the market in the next three years.
“This is the time, especially for developers, to plan and see if they can potentially launch in 2016 or 2017 because, then, the market will probably pick up, moving forward to 2020,” Volkers says. “Dubai’s population is still growing significantly and, recently, we tracked the data from the statistics centre, [which shows that] both the economy and the population [are] growing in Dubai at a fast pace.”
CBRE is currently studying the affordability aspect – a new concept that has been introduced in several projects in Dubai. Volkers says, “A lot of the developments that we see in the market are really not affordable because of ticket prices and the regulations for offline sales – you need to have a 50 per cent deposit before buying.”
According to him, many buyers of these affordable homes are investors who are raising the cost of the units when they rent them out, making them unaffordable for many.
“We know that there are quite a lot of developers who are looking into different development models where there is a focus on house corporations, [just like] in Europe,” he says.