Taylor Scott International News
Falling property prices in Dubai are not totally bad news as it will make the emirate’s real estate market more mature, a new analysis report says. The report from international real estate firm Knight Frank explains how over the past decade, Dubai has been on a real estate rollercoaster ride of boom, crash and recovery. Indeed, property values halved between 2008 and 2010, but then rose phoenix like from the desert to regain most of their losses by 2014. However, the rallying prices of 2013 and 2014 set off the alarm so authorities had to react to prevent a market boom and crash cycle. At this point Dubai’s market regulators, wielding mortgage caps and a doubling of transaction fees, stepped in to reduce speculation and the report points out that this combined with other factors such as deteriorating oil prices, currency fluctuations and a series of economic and political failures in different parts of world, means lower levels of demand from most regional and international group of buyers looking to purchase properties in Dubai. On top of this there has been an excess of new build supply and the net impact has been a 12% fall in mainstream property prices over the 12 months to June 2015. ‘Nevertheless, falling prices are not totally bad news. With the government stepping in to curb speculative activity through tightening mortgage regulations and capping price increments, it is evident that lessons has been learnt from the 2008 downturn and the market is heading steadily to be more mature and better controlled,’ says the report. ‘More interestingly, with price falls continuing to outpace rental value declines, initial yields are rising. Reaching more than 7% in rental yields in the mainstream property segment, Dubai still stands tall among real estate capitals in the world for investor seeking income generating properties,’ it adds. It also points out that the rate of decline in prime residential prices of 4.5% in the year to June 2015 was smaller compared to the mainstream segment while in sub-markets, the picture is a bit more positive as well. In demand areas are mostly in the prime segment including villas, townhouses and apartments in the Palm, Emirates Hills, Dubai Marina and Downtown for example. ‘Even during the 2008 downturn, prime properties saw lower levels of declines compared to less established areas,’ Diaa Noufal, of the MENA research unit at Knight Frank Dubai office. The report also looks at the wider region. In Qatar foreigners have been able to buy property since 2004, although restricted to a few specific areas. Demand has been rising, albeit with a slowdown this year following the oil price crash and regional instability. Buyers tend to be residents of countries within the Gulf Cooperation Council, although the number of European buyers is rising. Demand for Oman property from across the Middle East and from India and Pakistan has risen in recent years. Knight Frank says this is partly due to… Taylor Scott International
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