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Newsletter 09/2015

Construction/Property Updates | Dubai property transactions


Average Dubai house prices fell eight per cent year-on-year to the end of the second quarter, according to agents JLL, while the volume of transactions slumped 69 per cent from 23,800 in the first half of last year to 7,400 in the same months of 2015.

This is a marked contrast to the two-thirds crash in house prices that occurred in 2009 when Dubai was hit by a double-whammy of the global financial crisis and a bursting housing bubble.

No big bust

Abu Dhabi’s intervention in late 2013 to stop another bubble forming in Dubai housing is the reason why this has not happened again. In 2013 Dubai house prices rose by the most in the world. But in the autumn transaction costs were doubled from two to four per cent and mortgage criteria tightened at the behest of the UAE Central Bank.

That put a huge break on the market and prices began to fall by the second half of 2014. If house prices had been allowed to continue on their rocket ship trajectory post 2013 then the outcome would almost certainly have been another 2009-style crash.

JLL notes that this is a sign of a ‘more mature’ property sector in Dubai, and something that will make it more attractive to long-term real estate investors who dislike boom-and-bust cycles.

The debate now is whether the Dubai property market is going to be oversupplied by is upcoming development pipeline or not.

Growing population

Recent population growth rates of seven per cent per annum suggest not. JLL says that even a reduction to five per cent growth will take the population 400,000 higher by 2020, requiring more accommodation than the current development pipeline can offer.

Off-plan projects may also slow delivery if the local economy stalls as many found out in 2009-2010, while projects can also be cancelled and consolidated again. Most of the developers are government owned or controlled so this is a matter of central planning. Delivery delays are common anyhow.

For example, Emaar today announced the $229 million building contract award for its The Hills apartment project at the gateway to the Emirates Living Community. This off plan project was first launched two years ago in 2013. How long will it be before the buyers actually move in? 2018?

Over or under supply?

The construction of villas and apartments takes time and the market can also be caught short of property as it was in 2012-13 when the Arab Spring suddenly boosted demand for safe haven homes in Dubai and the local economy recovered from the global financial crisis more quickly than expected.

All property markets are cyclical. What is notable today in Dubai is that the cycle is now indeed more that of a mature economy than an emerging market, so the massive highs and lows have ended, short of a major regional or global catastrophy.

Absent such an event – or even because of it if subsequent money printing boosts oil prices as it did in 2009-13 – then Dubai property prices will probably fall modestly until autumn 2016 and then consolidate and bottom out ready for the next boom until 2020 and the Dubai Expo.

Originally published on

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