Dubai: The tighter mortgage lending norms since early December made sure that property transaction activity slowed down considerably since the start of the year. But there is another factor in play that is curbing speculative demand for ready or soon to be completed properties.

“Off-plan launches in Dubai have quadrupled since the start of the year and that sucked in nearly all of the speculative buying that was earlier there for ready properties,” said Sameer Lakhani, managing director of Global Capital Partners (GAP). “But that has also created a vacuum for ready properties because the genuine end-user finds that mortgage funds are still not that easy to come by. Also, the spike in property values is making it tougher on these buyers to commit to the initial down payment requirements and the additional expenses.”

According to data made available by GAP, the number of transactions registered with the Dubai Land Department since the start of the year is down 13 per cent compared with a year ago. More tellingly, on a peak-to-trough comparison scale, transaction activity is down 56 per cent — from 1,702 in September 2013 to just over 750 forecast for this month.

“Land Department registrations are a good proxy for transactional activity in the market, factoring in a five-six month lag to get the mortgage clearances and assorted paper work done,” said Lakhani. “But key locations in Dubai have seen value gains and that could slow the pick up in mortgage applications.

“For instance, even locations rated as affordable at Dh550 a square foot last year has gone past Dh1,000. In locations where prices have already gone through sharp gains, transaction activity has dropped significantly — at Arabian Ranches, these are down 42 per cent in the last six months and at Spring/Meadows by 27 per cent.

“New projects announced in emerging mid-income communities such as DWC, Majan, Liwan, Arjan, Jumeirah Village and DSO (Dubai Silicon Oasis) are up over 60 per cent on a year-on-year basis. This trend is expected to accelerate, as continued sluggishness at the upper-end of the market will lead to developers entering the mid-income segment.”

Some industry sources are hoping that the current transactional lull would not endure for long — “Notwithstanding the decline, there are sufficient signs to indicate the market reaching its peak (from a value perspective) — market prices have remained robust,” said Simon Townsend, business development manager at DTZ, the real estate consultancy. “There does not seem to be been a marked decline in investor interest as enquiries remaining strong.

“But investor caution remains and with good due diligence there is always an increase in transaction times. But there continues to be a flight to quality with owner-occupiers outnumbering speculators/investors.

“It is potentially too soon to judge the meaning of the current reduction in transactions; a true position of the market and its strength (or otherwise) will be clearer towards the final quarter of the year.”