Opportunity knocks for residential buyers in Dubai

With the price of oil showing few signs of a significant recovery any time soon, Dubai’s residential real estate prices are expected, by some, to continue to slide in the second half of 2015.

Those expectations are borne of the intrinsic link between oil prices and the fortunes of the large expatriate community in Dubai. When oil prices are high, the job market is healthy and expatriate employment levels rise due to attractive wages and tax-free living. Right now, however, the oil business is not at its most profitable, and expat employees are being shipped home or job contracts are being delayed.

On the flip side, Dubai remains committed to diversifying its economic reliance. That decision has raised the country’s profile as a tourist destination sky high and should go a long way in ensuring demand for all types of property won’t be held back for long.

Indeed, following a regular review, the International Monetary Fund (IMF) recently stated its view that the region is well-placed to weather the current oil price storm, with economic diversification at the core of that outlook.

“Non-oil growth remained robust at 4.8 per cent in 2014, driven by construction, notably owing to capital spending in Abu Dhabi, and services underpinned by Dubai’s transportation and hospitality sectors,” the IMF said in a statement.

A number of other hard-won lessons from the 2008 global credit crunch are also likely to play their part in limiting the period of falling house prices regardless of the number of expat exits from Dubai’s shores. While some caution is always advisable when making plans to invest in property, there are a growing clamour of whispers that house prices could recover as soon as 2016.

With that in mind, now could be a good time to assess the situation and consider which Dubai districts offer the best investment opportunities. The latest Reidin survey reported an 8 per cent year-on-year fall in prices across Dubai in the second quarter of the year compared to the same period in 2014.

In the wake of that report, and following other less optimistic data, Cityscape group director Wouter Molman remains sanguine: “We must understand that Dubai is experiencing a normal market correction which was always inevitable. While a lot of the figures we are currently witnessing are not as positive as we’ve seen in previous years, it seems clear that the medium- to long-term future for Dubai real estate is healthy.”

Taken together, this suggests that developments in the best Dubai locations will likely follow other prime real estate centres and fall by relatively small amounts before regaining and surpassing previous highs.

By that rationale, Downtown Dubai and Dubai Marina top the list for investors, for a number of reasons. They both offer a number of sought-after requirements such as proximity to the airports and other good transport links, and being near to one-of-a-kind attractions such as the Burj Khalifa and Bluewaters Island.

Of course, Arabian Ranches and Jumeirah Beach are also high on that list, given their allure to tourists and Emiratis seeking specifics such as access to world-class golf courses or a year-round beach lifestyle.

That’s not to say that other areas are not worthy of consideration, particularly if prices have fallen by a significant amount and you’re in a position to keep a property beyond a few months and look at it as a longer-term prospect.

Positive signs for the broader Dubai property market include figures showing a rise in the number of work permits issued in the first half of the year.

That’s right, while some of those working in Dubai were being sent back earlier than expected, there is still a healthy demand for migrant workers in specific sectors, which should help take the edge of any nerves over demand for newly built homes and developments planned for this year and the next.

Additionally, figures from the Dubai Land Department show monthly unit transactions have crept above the 400 mark since April, with 406 completed in July and surpassing the 367 from the same month a year earlier.

For those of you with a good memory of the 2008 property price slump, another good sign is that a number of developers and estate agencies have learnt from that time and altered the way they manage sales. In line with rules in the UK, many Dubai developers are now including a percentage of affordable homes within their overall plans and there are more flexible purchase options available too.

Changes such as these highlight that the Dubai residential property market is continuing to mature in a way that is welcoming to investors, and, more importantly, keeping them engaged and interested in Dubai real estate.

— The writer is the CEO of Sherwoods Real Estate.