Inflated property prices fall in Dubai
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Inflated property prices fall in Dubai
The Gowealthy Research Team evaluated prices at the various freehold segments in Dubai and our findings justify our stand. In recent weeks, we have noted a stabilization in the property prices; rates in key districts like Palm Jumeirah and Business Bay have fallen by as much as 20-25 per cent. While basic selling prices and price growth have not diminished, we observe a steep correction in the commissions of middlemen or brokers. As per the new dictates by the Government of Dubai, a seller may list his property/ properties only with 3 authorized brokers. The earlier practice of approaching 10-15 property brokers at time has been stopped with immediate effect. This has curbed the operations of unlicensed brokers who were primarily responsible for the price inflation in Dubai property market. Recent reports of panicked owners underselling their properties in Dubai and the downward slide of Dubai Stock Exchange are a result of confusion and ignorance prevailing among the public. All the publicly listed real estate firms are selling below their net asset values. But, stock markets, at any point of time, are not reliable determinants of an economy. Upon closer inspection, it could be affirmed that most of the distress sales in Dubai involved small-time investors who without sound financial backing entered the market for quick and easy returns on investments. The unrealistically high prices of both commercial and residential properties that the emirate has been witnessing for the past 12-14 months can be ascribed mostly to speculators. Now, with stricter lending and banking rules in place, speculative buying is expected to reduce drastically. This is bound to give way to a more practical and selective buy-to-live and buy-to-let mode of selling involving end-users. Upon assessing the current scenario, we find that the time is ripe for the government to impose tighter controls and checks so as to build a strong stable platform for solid long-term investments that it is actually targeting. The major developments emerging in Dubai, like Dubailand, the Palm Isles and The World are aimed at local and international investors seeking a stake in the emirate's future. To attract them, it is vital that Dubai has a transparent system with a strong legal structure. Presently, buyers are wary of market swings and downturns; yet, we would recommend investors to hold on to their assets for another 6 months. The impending lull in the construction sector will create a scarcity of available space, boosting demand and thereby prices. Investors are holding on to their cash to invest once the air has cleared on property regulations and buyers' and sellers' rights. The need of the hour is more clarity and transparency, which in the light of recent legislations, we can expect in the days to come. |
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The credit crunch that originated in the US has by now extended its grip on all countries of the world. However, its effect on Dubai and the rest of the Middle Eastern economies has been minimal because of their strong socio-financial framework and visionary economic policies. Yet, to prevent any mishaps, the UAE has initiated a quite a few reforms to bolster its legal and banking framework. We had predicted a correction in the property prices across Dubai after the government issued a spate of declarations to streamline activities in the real estate sector.
