Wouldn’t it be amazing to be able to turn the clock back a few years, and with hindsight snap up any property you could get your hands on in Dubai. The property market in the emirate is so immature that it wasn’t even really in existence ten years ago! Ten years ago you couldn’t buy freehold property for example, but then back in 2002 His Highness Sheikh Mohammad bin Rashid Al Maktoum decreed that foreigners would be allowed the right to buy freehold real estate within certain developments and from certain developers.
Initially prices were low, yet the building standards, the vision for Dubai, the personification of luxury that the emirate seems to embody and the rapid population and wealth growth of Dubai meant that prices skyrocketed. They doubled and even tripled in 12 month periods and climbed and climbed until property per square meter in Dubai became some of the most expensive in the world.
‘If only we’d bought back then’ – isn’t that a common thought? Well, the absolutely fantastic news for those who failed to buy in time to ride the wave of Dubai’s success is that they are being given a second chance. Property for sale in Dubai is now for sale at heavily discounted prices. The only thing is, you wouldn’t think so to look at the advertised prices. So, here’s what you need to know to get your hands on low priced property stock.
Dubai’s market is so immature and has grown so rapidly that it is suffering the effects of a harsh knee jerk reaction. As soon as there was any talk that the emirate would feel some of the effects of the global financial crisis, the immature investment climate crumbled. No one was able to hold their nerve as all around them panicked, and despite the incredible and undeniable fundamentals supporting Dubai’s success for the long term, (more about these in a minute), the property market in the emirate has been sent tumbling!
Up until about September 2008 no one was willing or able to accept that Dubai could possibly suffer from the credit crisis. After all, here’s one of the wealthiest locations in the world, with licence to print money from oil, with affluent big brothers like Abu Dhabi to take care of it, and where global businesses can operate free from the shackles of taxation or over-regulation. The emirate was still a record breaker in terms of the numbers of people arriving to live there each month too. And all of these factors were supporting the ongoing positive advancement of the property market. But then economics and reality bit! International companies in the emirate were affected on multiple fronts – parent companies were reining in budgets and cutting back staff, globally banks were refusing to lend and reneging on previous credit terms which forced companies in Dubai to lay off staff, cut business, even close up shop. Fewer jobs were becoming available therefore fewer people were moving to Dubai. Less property was in demand therefore the property market stumbled. Stock market listed companies saw share prices fall, and all of a sudden the unshakeable confidence that the world seemed to have in this market was tested – and found wanting! Because Dubai has no historical data to draw confidence from, all investors seemed to want to run away – and this has massively undermined the property market.
The latest professional report on the state of the market is from HSBC, it shows that there was a 23% fall in average prices last month, and that despite signs of stability in advertised prices, discount to agreed prices has deepened.” Furthermore, there have been “signs of distressed selling in the fourth quarter of 2008”, and some properties have been sold off by desperate vendors at prices “that fell short of estimated construction costs”.
The sentiment of doom and gloom in the marketplace was articulated perfectly by Roy Cherry, an analyst at Shuaa Capital, he has stated that “we have moved from a strong correction scenario to a crash scenario” and that Dubai property prices could fall by as much as 60% over the next 6 months!
This is absolutely fantastic news for those who missed the boat the first time around. How often in life does one get a second chance! And yet here we are, with immaturity in the market causing an immature reaction to an unprecedented situation. All set against a backdrop of a location with – as previously mentioned – incredible and undeniable fundamentals that support Dubai’s success for the long term. And these fundamentals include the fact that Dubai is a very wealthy nation with very wealthy supporters who can and will bail the emirate out if needs be. It is a location with a mature government that looks to the long term rather than relies on the short term speculative behaviour of immature investors for its successes and failures. It’s an emirate with ambition and the wealth and vision to support it – and ultimately, once the rest of the world sorts itself out, Dubai will again continue to advance and grow as it attracts businesses and workers and professionals, and its property market will be in demand all over again. Even if it never again returns to the lofty heights of September 2008, it will certainly lift from a 60% discounted state. Therefore we truly feel that if you can watch and time the market carefully, haggle hard and take a chance when you seen an opportunity, you will be able to buy a heavily discounted property that you will either be able to let out for top dollar, or resell for a handsome profit over the medium term. But then, that’s just our opinion!