Despite the active development, the UAE real estate market remains underestimated, experts say. After the devastating earthquakes in Turkey, here they are waiting for a new round of sales growth. Experts interviewed by the Realty Times spoke about the laws and history of the Dubai market and specified how long it will take to enter the stage of downward dynamics.
Is it worth buying property in Dubai, we rely on history
According to Georgy Patanin’s General Director of the Real Estate Agency Georgy Patanin, when discussing the risks of a possible bubble collapse, for example, in Dubai, it is worth turning to history. According to him, you can use the Fibonacci retracement indicator, which says that the sharpest growth in the emirate’s real estate market was recorded between 2004 and 2005.
After that, there was a significant decline with slight corrections in the direction of growth and fall, which indicates a struggle between the buyer and the seller for prices. In 2009, there was a sharp market crash, and in 2009 he actually came back to where he started in 2004.
– In total – it took the market 1764 days or about 5 years to go through a full cycle. Further, from the moment of the collapse to the moment of the next peak, 1916 days occurred, which is also a little more than 5 years. Thus, we can say that the market cycle takes about 5 years, says Patanin.
The expert clarifies that at the moment, the last hole in the Dubai market was about 900 days ago. Thus, the next cycle will end in about a thousand days.
– In other words, the growth of the Dubai real estate market will continue for another 2.5 years. Now it is at a relatively low price level, that is, the potential for growth remains. According to our forecasts, before the next collapse, the Emirate market will grow by at least another 40%, the specialist summed up.
In total, there have been three big price drops in the history of the country – in 2008, in 2012 and in 2020, Ekaterina Pozdnyakova, project manager at Garnet investment company, also clarifies. In this regard, there is a possibility that the market may collapse sharply due to some large-scale events.
- Real Estate UAE
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Real estate growth in Duab: the market is undervalued
The marketing director of Lange&Smith Kirill Zolotukhin believes that the UAE market is underestimated. According to him, in order to correctly answer the question of whether the segment has exhausted itself, he suggests turning to statistics.
Statistics and analytics in this matter are accumulated by the largest Swiss financial holding UBS Group AG, which provides a wide range of financial services around the world. The report, which is published annually, provides data called the UBS Global Real Estate Bubble Index (an index of the “bubble” in the world’s largest cities).
– According to the report for 2021, the Dubai index is in the negative indicator, which means that the real estate market is undervalued. This was affected by the situation in the world with COVID-19, certain projects were suspended. The government’s focus was on healthcare, Zolotukhin explains.
But in 2022, according to him, the flow of tourists returned, developers resumed projects, the events of February 24 also made their own adjustments: Russians took first place among expats. Moreover, 44% of buyers from Moscow, 10% of buyers from St. Petersburg. The market began to gain weight.
The expert clarifies that the main theses in the Dubai market that attract investors are that real estate here is cheaper than in Moscow, and the yield is higher. And this is true.
And now to the logic. This analytics is collected by the largest developers and developers in our country. Realizing that the native market is “in a coma”, it is necessary to find alternative sources of income and attract customers,” continues Zolotukhin.
Dubai for developers is one of the easiest solutions to enter the international arena, he clarifies. The one who first enters the market and conquers it, guarantees himself a name and reputation in the international arena for many years to come.
– As a marketing director, I consider Dubai an opportunity for a comfortable life for a modern person living in two cities. This is exactly the city that is now developing at an incredible speed and which has all the best for development, recreation, and business. Dubai is everywhere now,” he concluded.
Pozdnyakova believes that investments in Dubai were profitable for Russians when the dollar was worth 50 rubles, and now, when the value of the American currency varies within 73 rubles, this is no longer of such interest to compatriots.
The UAE will still have to face an influx of our compatriots who want to invest in overseas real estate. The recent earthquake in Turkey, the restriction of residence permits and the tightening of conditions for obtaining citizenship make the Emirates a point of attraction for the Russian investor.
- Real Estate UAE
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Is it worth buying property in Dubai: risks and expert advice
Ekaterina Pozdnyakova also sees the potential for growth in the Dubai market. However, she says there are still risks. One of the main pitfalls of the Dubai real estate industry lies in the plane of installments.
– So, if we have a mortgage or 100% payment, then in Dubai there are calculation schemes, when, for example, the buyer pays only five percent of the cost of the lot, and the second payment is at the end of the construction, when the entire amount of the contract is closed. At the same time, in the emirate’s market, investors are actively reselling their installments, that is, in other words, selling apartments by assignment. In my opinion, the first sign of an inflating bubble is the resale of installments,” said Pozdnyakova.
However, according to her, unless some high-profile events happen on the world stage, affecting, among other things, the economic segment, the fall of the Dubai market should not be expected in 2023. However, a scenario is not ruled out, in which the deterioration of geopolitics in the world can give the region a new influx of wealthy migrants.
– An investor entering the Dubai real estate market should understand that this is a game of roulette, as this market is very subject to outside influence, compared to the real estate markets of other countries. The authorities of this country have spent a lot of effort and money to attract foreign capital and foreign investors, Pozdnyakova summed up.
Recall that we also previously reported that Emirates and Turkey have become the most popular destinations for departing Russians.
The report Dubai Property Investing: Price Analysis, Bubble Risks and Growth Forecast in 2023 appeared first on The Realty Times.
