Dubai: The froth that was building up in Dubai’s values for ready property between December to early February has now more or less been erased. Current asking values for such property are now back to what they were late last year, and just before the Expo 2020 win premium took hold of them.
“Between August to December last, property values were up 10-12 per cent and in January there was a sudden 10-15 per cent hike in what owners were demanding (for completed freehold homes),” said Chandrakant Whabi, CEO of Acrohouse Properties. “It was at the time that potential buyers got put by the mark-ups and decided to stay away.
“Since then, the January spike has been chiselled away from owner demands and values are close to their December levels. Transactions are happening at these levels, though at a lower volume than what they were during December/January.”
Clearly, property buyers are showing an innate resistance to what they perceive as too high a premium. This is also when the higher caps on mortgage disbursals really started to bite into demand patterns. With potential buyers expected to put up a mandatory 25 per cent to buy (it is 20 per cent for the UAE nationals) from December onwards, it led to demand from end-users (as opposed to investors) tapering off significantly. (Even the down payments are higher because Dubai’s home values have gone up in the meantime. Plus the registration charges were doubled to 4 per cent from October, adding to the upfront costs for the buyer.)
All of these had a hand in bringing down buying activity in Dubai in recent months, as did the way in which cash buyers diverted their attention to off-plan launches – with the promise of better yields - during this period. This is exactly what the authorities would have wanted too. The local economy, analysts say, cannot have a repeat of 2008 where property values shot up way too high and too quickly, and in many cases for projects that were yet to make it past the drawing board.
According to Sameer Lakhani of Global Capital Partners, “The situation now is such that transaction levels have dropped appreciably (by 30 per cent on a city-wide basis). But property prices have only just started to retrace and that too in the high-value segment (where rental yields are the lowest).
“It is only when there is a price correction at the upper-end that there will be evidence of the markets cooling down. The drop in transactions in the last few months is pointing to an imminent price correction, again at the top-end.”