Dubai: Although Dubai's demand and supply situation is currently good, house prices could drop slightly when a glut of supply comes on to the market in the next 18 months, according to industry experts.
The key drivers behind Dubai's successful property market are that the supply and demand situation still remains good and that financing is readily available, said Ian Albert, regional director of Colliers International.
Supply is still not meeting demand and this is set to continue for the next 18 months, according to Albert.
Due to the decline in the UAE financial markets, many investors have withdrawn investments from the stock market and parked their funds in real estate. This, too, is keeping demand at healthy levels.
However, the continued success is largely subject to available liquidity.
The UAE Central Bank has already created a Dh50 billion pool from which developers can borrow to ensure projects go ahead and finish on time.
Interest rates have also fallen to stimulate lending.
Albert estimates that in around 18 months, there will be a sudden surge of available products.
"When that happens, there may be a short-term fall in prices - less than a year," said Albert.
Focus
Investors in Dubai's much-discussed property market have become more cautious and more focussed when buying.
"For Colliers, Cityscape has been a success. We've seen more enquiries for consultancy services, instead of visitors just viewing the event as a retail show, which is how it's been for the past couple of years. Because you can't buy on-site, it's hard to gauge the success of some developments straightaway," Albert said.
Albert said that investors this year have been more cautious and there has been a greater degree of due diligence. "There has been an air of cautiousness seeping in from the general feelings of the international market," Albert said.
Although the volume of housing has stayed the same or increased, actual sales have decreased due to greater competition.
"People forget that property, historically, is not a liquid asset," Albert said.
Whereas, the fundamental problem in the nightmarish UK property market is a lack of financing, here in Dubai financing is still readily available, albeit at slightly reduced rates.
"Look at the HPI [house price index]. There was a growth of 42 per cent in property prices in the first quarter this year. In the second quarter, this slowed to 16 per cent. But that's still growth," Albert said.
Colliers launched their latest house price index on Wednesday. It showed the blended average rate of residential property in Dubai in the second quarter 2008 was Dh1,833 per square foot. Apartment prices rose by 83 per cent in the second quarter and villa prices by 73 per cent, as compared to the same period in 2007.