Recent views about ‘hot money’ from troubled countries in the region pushing up house prices in Dubai has been contradicted by leading real estate brokerage firms in Dubai.
The increase in prices is purely because of demand and there are no signals about any bubble in the making, they say.
“It is premature to talk about another bubble in the making at the moment,” Charles Neil, Chief Executive Officer at Landmark Properties told Emirates 24|7.
Prices of villas in the popular Emaar community, The Springs, have gone up by 20-30 per cent in the past six months.
For example, a 4M which was going for around Dh1million is now being advertised above Dh1.3million these days and a 3E has gone up fromDh1.7million to nearly Dh2million.
The spike in prices leads us to the question of whether property is again appreciating too fast? Do these figures indicate another bubble in the making?
“No” is the answer of real estate brokers.
“We always predicted in our research that villa prices would be the first segment to recover because there was a finite supply of villas with very few deliveries of new villas taking place after 2012.
"The other reason why there is a higher demand for villas is that it is still the preferred lifestyle for the majority of families with children who come out to live in the UAE,” said Neil.
“I do not feel there is a bubble developing, but I do see signs of prices climbing due to the mechanics behind supply and demand. Dubai has a certain quantity of good stock and The Springs for the most part are good stock as are other select properties around Dubai.
"As these properties disappear from the market, those still available will appreciate in value as their quantity decreases. Prices have been appreciating over the last 12 months on select properties.
"People have now realised that prices on certain stock have dropped as far as they are going to go and now they are moving on these units,” added Tom Bunker, Investment Sales Consultant, Head Office at Better Homes.
Realtors believe that ‘hot money’ may not be the factor pushing up sale prices. A lack of trust in financial institutions and the belief that real estate gives returns overtime are drawing the attention of many investors.
“Investors are tired of trusting banks and are falling back to real estate once again. Dubai has always been an interesting real estate market and it is a market that seems to have caught the attention of investors once again,” said Bunker.
“Typically in the real estate cycle when prices bottom out (which appears to be the case with villas) sellers who were selling in the down cycle with a view to buying back in when the market picks will no longer do so and withdraw their properties from the market.
"Furthermore, those investors who have been able to hang on will also try and hold for longer if they see prices rising.
“This tightening up of supply being offered for sale has been apparent for the past six months and agents are scrambling around to find villa inventory. Owner are being emboldened because they start getting lots of calls for their villas and are now not willing to negotiate on the price.
"Thus, a good part of the increase has come from the bid/offer gap narrowing. I feel, therefore, what is happening is typical of the sharp corrections you get when prices bottom out , but once these prices have bounced back you go in for more normal levels of price increase thereafter,” explained the Landmark expert.