In Dubai property market, is it time for bargain hunts?

After a prolonged period of commentary stating that US real estate markets were suffering from structural shortages, the zeitgeist has now shifted to talking about rising inventory levels.

With more than one third of the US registering annual price declines, the work suddenly has started to zone in on the prolonged impact of the ‘higher for longer’ interest rate. And the fact that affordability (or lack thereof) is now starting to bite.

Jumping in medias re (Latin for in the midst of things), rising inventory levels suddenly has firms from Zillow to Goldman Sachs observing that housing prices are expected to fall. Plus, the gap between new builds and their older counterparts could shrink, with increasing incentives being offered to entice potential buyers by way of price discounts or other BNPL options.

The sudden shift in commentary notwithstanding, is this something that we are witnessing in the Dubai real estate space as well?

The ebullience of the overall asset markets - and the domestic headlines - would certainly have you believe otherwise. But it is curious to note that not two months after the Fitch report (which was not the first that commented on the issue of oversupply in recent months), the commentary here has shifted too.

From moderation to even suggesting small declines, even as experts continue to pontificate that there is nothing to worry about. And that mild corrections are healthy for long-term sustainability.

Whilst that may be true, (we certainly are in one of the best periods of asset gains in history), it is important to remember that data presents a vast and often impenetrable domain. We approach them from a certain horizon of understanding.

Taking selected combinations of data into consistent narratives tends to skip discrepancies that paint a contradictory picture. Certainly, there is the proverbial danger of skipping the fact that periods of excessive optimism are often followed by periods of excessive pessimism.

Algorithms may have factored this into the buy the dip mentality. But we forget that housing markets remain dominated by individual investors, and they have become increasingly cautious despite the new influx of people streaming in.

That, and the fact that offplan properties continue to show signs of softening, we have to ask the question as to whether global real estate markets are starting to move in closer tandem. Just as capital markets have done, given the fact that the underlying dynamics that have been driving asset prices post-Covid have essentially been the same.

The same can be said for the price incentives offered by developers. Some of which are surprisingly attractive even in these enthusiastic times, often hiding in plain sight, and analogous to the bargains seen in the capital markets with the likes of UPP and Amlak that the markets realized eventually.

Price indices are not painting this story as yet. It is puzzling to note that starting prices for new launches from JVC to Arjan to Majan and Liwan, and even DSO and Sports city are more or less the same, before incentives. It may well be that this is just another lull in the continued upward trajectory.

If global trends are anything to go by, inflection points may well have been crossed. In a world filled with noise - with undue emphasis given to institutional investment decision-making, ignoring the folly that the same class of investors make - individual investors have to be sensitive to picking out the signals that differentiate bad arguments from compelling ones.

By the time it shows up in the data, the ship has often already sailed. Given that, let the bargain hunting season begin.