Doom and gloom: that’s what many analysts said would be the defining characteristic of Dubai’s real estate market in 2008. The theory was that, as hundreds of residential blocks are completed, supply would overtake demand and send property prices into freefall.
But it didn’t happen – far from it, in fact. A recent report by Colliers International found that Dubai property prices have increased by a massive 78 per cent in the last year. Prices were up 42 per cent in the first quarter of 2008 alone. Another report found that villas selling for around Dh3.65 million six years ago are now priced 10 times higher.
It can’t go on for much longer – or can it? A new report by ratings agency Fitch has found that, although supply could catch up with demand by the beginning of 2009, widespread delays on project completions could temper a crash, and lead to a mere “orderly moderation in rents and property prices”. The report, published today, says new homes coming on to the market will reach record highs in 2009-2010.
From a wider economic perspective, local banks are largely insulated from the subprime markets, and so are not feeling the impact of the worldwide credit crunch. The government controls an estimated 50 per cent of Dubai’s upcoming property stock, and so can drip-feed the market to prevent a crash.
However, some analysts believe that, after the predicted peak in the construction boom in 2009, property prices will fall back sharply. Wider factors – such as inflation, a deeper global recession, and tensions between Iran and the West – could also play a part in influencing prices.
What do you think? Are Dubai property prices set to increase further, with only a mild ‘correction’ on the horizon? Or could a massive increase in supply – combined with other factors – hit hard?
Have your say by submitting a comment below, or emailing us at online@business24-7.ae. The best comments will be published in Emirates Business on Sunday 13 July.