2012 is credited as a year of optimism as it brought many good news for Dubai real estate sector. However, the growth has divided experts into two groups; one of which believe in that 2013 will prove to be as dynamic as 2012 was while the rest say that pace of growth will be slowed down. The following article will help readers to separate facts from fiction about the recovery of Dubai real estate sector.
Dubai real estate market has been showing strong recovery signs since 2012, after global fiscal distress bottomed out the market in 2008. Though the recovery remains uneven throughout the region and limited to posh areas but experts believe that sector will continue to experience an upturn in the foreseeable future. However, few experts predict that 2013 will also bring robust growth but the rest deny and say the pace of growth is likely to be slower as compared to last year. No matter at what pace but indications point to a continued recovery in Dubai real estate sector backed by emirate’s strong economic growth. Let’s separate the facts about the rebound of Dubai real estate market from the fictions in the following post.
Demand & Rates Further to Grow
It is noticed that demand for properties at prime locations in Dubai is increasing and so are the sale prices and rental rates. In the first three months of 2013, the average sale price of properties increased 10 to 12 percent. Rents are up as well, rising 3 percent for apartments and 4 percent for villas. After the real estate prices decline by over 60% during the recession period, Dubai has been experiencing a gradual recovery in its property market, mostly buoyed up by the return of speculative buyers in the market. Apartments in Dubai Marina and Down-town Dubai saw some of the biggest rental increases, rising 22% and 21% respectively. Sales prices of villas in the posh areas witnessed an increase of 10% to 11%.
Wide Spread Recovery
Another group of experts believe that sales and rental price hike will remain subdued in 2013 as the recovery will extend to a wider cross-section of Dubai, as opposed to recovery being limited to posh areas in 2012. Posh area properties such as Dubai Marina apartments enjoyed the strongest rise in average prices and rents in the last year. Improved sale and rental price performance at secondary locations and launch of a number of property projects lately in 2012 at the secondary locations, enticed potential investors to come back and trust the sector again by investing their money. Over supply was considered as a serious issue of Dubai realty market but a systematic approach is adopted to add new property units in the market so increased demand will continue to mitigate the over supply issue as new projects announced last year will take some time to come to completion.
Over Confidence
Over confidence is the biggest threat that Dubai real estate market will face in 2013 and it can drastically affect the sustainable growth in the region. Experts say that most of the cautious investors holding back their investment for long, showed over-exuberance and invested in every possible development. However, analysis suggest that not all projects and developments will benefit equally from the broader-based recovery so potential investors must view market with cautious optimism. It is also seen that investors are returning to invest in off-plan properties and not being cautious about taking risks with incomplete projects. The reasonable confidence returning to Dubai real estate market is positive but it should not be turned into over confidence and ruin the market charm like it did in past.
If UAE government and stakeholders will keep on playing their roles appropriately with cautious approach, the sector cannot just recover in 2013 but it will also hit back to its original highs in the years to come.
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