Headlines focusing on the biggest shifts in Dubai real estate prices and rental costs may be distorting the perception of the market recovery suggesting the boom times are back. The reality is a more subdued recovery for most locations.
The Prime Global Rental Index published by property broker Knight Frank showed just a two per cent rise in average prime rental costs between June and March, and a 3.3 per cent rise over the year to end of June. Admittedly rises are accelerating but this is hardly a runaway boom.
But try telling that to tenants in The Greens where a one-bedroom apartment is up from AED50,000 to AED65,000 over the past year, admittedly still well down on the peak of AED120,000 in the boom years.
You could also cite the three-bedroom large Jumeirah Park villas tipped by the ArabianMoney investment newsletter in May that are now re-selling at 20 per cent higher. Then what about the recent flipping of off-plan releases in the same location and Emaar’s latest Address serviced-apartment project in the Downtown?
True but a few hundred speculators do not make a mania. Besides if this is all a bit too much too soon then the market will slow again. If off-plan resellers find themselves stuck with their purchases and unable to flip them on then they will not be in the queue at the next sale.
Has Dubai learnt nothing from the past madnesss? It is all happening again, wail those who got the cycle wrong last time. They fail to understand the market cycles of real estate. Dubai property took a very big fall in 2008-9 with up to 60 per cent knocked off prices and rentals. It’s really just getting back on its feet.
This could just be a ‘dead cat bounce’ in the market. That means a small recovery from a great fall that is followed by another fall.
It is not hard to see how that might happen. The global economy looks in precarious shape. If the US dives into another recession next year, China has a hard landing and the euro breaks up then oil prices would fall along with tourism to Dubai, and Dubai real estate.
However, markets climb a wall of worry in their recovery phase. Dubai property prices became unbelievably cheap by the standards of other major global commercial hub cities. Rich people in the region have been taking advantage of these low prices and some of those fleeing the collapsing markets of the West and East.
The true recovery of the Dubai real estate market has hardly started. It could be a bumpy road ahead but there is a very long way to go.