Dubai: A full-fledged recovery for Dubai real estate’s should start by “early 2017” after a slight delay caused by global investor uncertainty surrounding Brexit, according to a forecast from the global consultancy JLL.

“Even though it is too early to predict long-term implications, overall there is a slight probability of British investors being negatively impacted by the devaluation of the pound,” said Craig Plumb, Head of Research at JLL Mena.

“However, we believe the effect of the decision will have temporary repercussions as a substantial number of British investors who work and reside in the UAE avoid sourcing their income in sterling.”

But the prediction of a recovery next year does comes with a caveat — there should be “no major external shocks over the rest of the year”.

Dubai property prices are currently 15 per cent off their mid-2014 peak.Transaction activity for both ready and off-plan properties in recent weeks has been deemed steady,

Even then, “If we dissect the market further, particularly for residential, we notice that expatriates in Dubai are most likely to continue renting their homes instead of switching to ownership, resulting in sales being more negatively affected than the rental sector,” said Plumb.

“If external factors stabilise over the rest of the year, we expect the Dubai residential market to easily recover in early 2017.”

While there is no saying what external shocks could be in store, internally, Dubai’s developers are ticking off the right boxes. For one, they have slowed down the number of project deliveries, so that new supply will not hurt price recovery.

The JLL report reckons that only about 23,000 units are likely to be delivered in the second-half of the year and 27,000 units for the whole of 2017. (For the first six months of this year, less than 10,000 units made the transition.)

Meanwhile, according to an outlook put out by the estate agents Allsopp & Allsopp, there is already a marked increase in demand for properties valued at under Dh4 million. Its number for properties valued at Dh5 million and over was “only 13 per cent” over the last quarter.

“Every property we’ve sold in the last two months has had multiple offers on it and ended up selling above the listed price,” said Lewis Allsopp, CEO. “This is the first time in the last two years owners are increasing the asking price and actually receiving it. We’re starting to see bidding wars with multiple buyers putting offers in — and it’s all in the under Dh4 million segment.

“Essentially, if you have a property close to handover, people are interested and there’s a definite market out there of ready and willing buyers.

“We’re actually registering more buyers than properties ... so we’re starting to see a shortage of supply, which combined with buyer demand and sellers putting prices up, all points to a shift in the market.”

The deficit in the number of properties being put up for sale could be because their owners reckon that an upturn could be on the way. And that it’s better off for them to wait it out rather than try selling now and not getting their asking price.

Also, on properties valued at Dh5 million plus, the existing mortgage cap has a requirement for a higher deposit of 35 per cent to be put up.

“Following implementation of the lending caps, more buyers are opting to mortgage their properties,” said Allsopp. “And with the cap we have found the appetite to buy properties above that price band deteriorate, which has resulted in the higher end of the market suffering in terms of pricing.

“While the figures don’t read well for owners of properties over Dh5 million in terms of buyer activity, should the mortgage cap regulations be eased, with buyers being allowed to put less of a deposit down (currently 65 per cent loan-to-value), we would see more traction.”

Weighing up the Brexit factor 

The opinions over Brexit and what it means for UAE realty remain sharply divided.

According to the latest update from GCP-Reidin, “The fear of a weakening currency (pound) and its impact on foreign real estate markets is likely exaggerated and in point of fact, there might well be a positive impact on markets such as Dubai as foreign flows continue to gather pace, especially in light of the ensuing uncertainty that has been created as a result of the referendum,”

“In the weeks after Brexit, global markets fell by nearly 5 per cent as fears of a 2008 redux permeated the ecosystem. However, soon after, concerns began to recede, global markets began to recover, except for the sterling.”

Last year, British investors pumped Dh10.8 billion into Dubai property, representing an 8.6 per cent share of the overall. This compares with Dh5 billion in 2012, for a 3 per cent share.