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Are Dubai falling house prices a correction or a reduction
| Published: | 11 Jul at 6 PM |
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One of the major topics of conversation amongst expats working in Dubai is the emirate’s falling property prices.
Some believe it’s a long-awaited correction in the expensive city, with others maintaining it’s simply a reduction which will reverse itself in the near future. Either way, it’s supposedly good news for potential expat property owners. Potential reasons behind the move downwards range from oversupply through lack of demand, a jobs market which is now struggling or difficult economic times. However, real estate agents in the city are contradicting the general opinion with statements that they’ve never been so busy, with serious buyer numbers far higher than at the same time last year.
Reinforcing the professionals’ opinions are several factors including a decline in the number of home owners wishing to sell up, thus damping down perceived wisdom that both the jobs market and the economy are struggling. As regards oversupply, admittedly there is an increased element of choice at the present time which is affecting the market as a whole. However, it’s being seen as a good thing both for buyers and renters. The minimal effect it’s having on the market as a whole isn’t destabilising the entire structure of real estate in Dubai.
Most property professionals strongly believe the main reason for the lowering of prices is the recently introduced mortgage cap. Introduced at the end of 2013, the cap was intended to stabilise the market in order to prevent a crisis likely to lead to a runaway property price boom and bust. Now the cap is in place, buyers need to find at least one third of the full price in cash. The rule breaks the amount down to a 25 per cent deposit from expats and 20 per cent from Emiratis, coincidental with maximum available loans of 75 per cent for expats and 80 per cent for Emiratis and not including legal fees and other expenses.
Given that Dubai’s demographic is heavily weighted towards foreigners, expats are the main focus of the housing market. Adding the effect of the new cap to the necessity of finding even more cash for furnishing, decorating and alterations, it’s no surprise that saving a huge chunk of money whilst covering everyday expenses is tough even given expat salaries. The reason behind the fall in Dubai’s real estate prices becomes clear – only a limited number of people can actually afford to buy due to the upfront costs of the process itself.
Some believe it’s a long-awaited correction in the expensive city, with others maintaining it’s simply a reduction which will reverse itself in the near future. Either way, it’s supposedly good news for potential expat property owners. Potential reasons behind the move downwards range from oversupply through lack of demand, a jobs market which is now struggling or difficult economic times. However, real estate agents in the city are contradicting the general opinion with statements that they’ve never been so busy, with serious buyer numbers far higher than at the same time last year.
Reinforcing the professionals’ opinions are several factors including a decline in the number of home owners wishing to sell up, thus damping down perceived wisdom that both the jobs market and the economy are struggling. As regards oversupply, admittedly there is an increased element of choice at the present time which is affecting the market as a whole. However, it’s being seen as a good thing both for buyers and renters. The minimal effect it’s having on the market as a whole isn’t destabilising the entire structure of real estate in Dubai.
Most property professionals strongly believe the main reason for the lowering of prices is the recently introduced mortgage cap. Introduced at the end of 2013, the cap was intended to stabilise the market in order to prevent a crisis likely to lead to a runaway property price boom and bust. Now the cap is in place, buyers need to find at least one third of the full price in cash. The rule breaks the amount down to a 25 per cent deposit from expats and 20 per cent from Emiratis, coincidental with maximum available loans of 75 per cent for expats and 80 per cent for Emiratis and not including legal fees and other expenses.
Given that Dubai’s demographic is heavily weighted towards foreigners, expats are the main focus of the housing market. Adding the effect of the new cap to the necessity of finding even more cash for furnishing, decorating and alterations, it’s no surprise that saving a huge chunk of money whilst covering everyday expenses is tough even given expat salaries. The reason behind the fall in Dubai’s real estate prices becomes clear – only a limited number of people can actually afford to buy due to the upfront costs of the process itself.
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