The Paris-based Bureau of International Expositions will decide today the host city of the World Expo 2020. If the Expo is awarded to Dubai, industry experts say this could lead to more significant increases in property prices.
Dubai’s housing market is in the recovering phase since 2011, and the sustained rise in housing prices in recent years has been driven by strong fundamentals rather than speculation, according to a Standard Charted Bank report.
A winning bid will add to the price-rise momentum. Prime residential communities are expected to recover faster and hit their previous peak by mid-to-late next year.
“The investors will continue to see healthy total returns on the back of rising capital values, whereas end users may find that rising prices, combined with higher loan-to-value restrictions and transfer fees, leave them unable to purchase property that they would have been able to buy just six to 12 months ago,” said Khawar Khan, Research Manager, Knight Frank.
End users
End users will either have to save money for a longer period for the deposit or settle for a smaller property or an inferior location. On the other hand, tenants would have to pay higher rents or downgrade to a cheaper property or community, says Sarit Thomas, Associate at Taylor Wessing.
“It is almost certain that prices and the level of development will increase exponentially, as all investment asset classes are ultimately fuelled by confidence in the said asset class,” said Richard Bradstock, Senior Consultant with IP Global, a property investment company.
Right reasons
“The major worry is not whether it will happen or not, but whether it’s happening for the right reasons. Property price rises based on single, one-off events are rarely sustainable and it concerns us, given the market’s recent jumps over the past 18 months, coupled with the fact that prices are likely to rise even further should Dubai win,” says Bradstock.
“Assets that go up in value extremely quickly generally lead to very short investment cycles. For a property asset, it is not ideal.”
