Dubai's property market is showing green shoots: transactions rose in the first two months of 2019, and developers are reporting good numbers as lower prices attract new buyers despite oversupply.
More Buyers in the Market
"In the first two months of 2019, there is increase in number of transactions. There are more buyers in the market. The government's initiatives like 100 per cent foreign ownership and 10-year visa are the privilege that the investors are looking for. We are targeting new markets like Africa, the US and Canada to enhance foreign investments into Dubai," said Majida Ali Rashid, assistant director-general of the Dubai Land Department (DLD).
"Dubai's property, real estate infrastructure as well as investors are pretty matured now," she said on the first day of the three-day International Property Show, which opened at the Dubai International Convention and Exhibition Centre on Tuesday. In the first 11 months of 2018, transactions totalled Dh194 billion, with investors putting in Dh62 billion between January and November.
Danube: The Right Time for End Users
Atif Rahman, director and partner of Danube Properties, expects current inventory to be absorbed by winter, when demand picks up and there may not be enough supply left for buyers. "That's why, it is the right time to buy for end-users, who can get the best from bargain."
He said Dubai's real estate market will keep attracting investment whatever the demand-supply situation and however it shifts with market conditions. "Right now, off-plan sales might grow at a slow pace and sale of ready-to-move-in homes might be an attractive proposition, depending on how the developers attract the home buyers."
A More Balanced, End-User Market
According to Property Finder, off-plan properties accounted for 55% of Dubai transactions in the first two months of 2019 and the secondary market for the remaining 45%. That is a far cry from earlier cycles, when off-plan sales dominated and secondary deals trailed far behind, and the unusual balance suggests Dubai is no longer a purely investor-driven market.
| January–February 2019 | Homes transacted | Share |
|---|---|---|
| Off-plan | 3,069 | 55% |
| Secondary market | 2,463 | 45% |
"Robust activity in the secondary market denotes that end-users are still active and purchasing homes in Dubai. When compared to the first two months of 2018, off-plan property transactions have declined by 7.8 per cent this year," Property Finder's research said.
"Prices in the secondary market continue to be more attractive and affordable, while sellers have been much more motivated, one reason due to their competition with off-plan, ready stock," said Lynnette Abad, director of research and data at Property Finder. Secondary transactions in January and February 2019 were down only 1.4% year on year.
Palm Jumeirah, Dubai Marina and International City recorded the most secondary apartment transactions in the period, while Dubai Hills Estate, Downtown Dubai and Dubai Creek Harbour (The Lagoons) took the lion's share of off-plan deals.
Developers See an Uptick
Farhad Azizi, CEO of Azizi Developments, echoed the DLD's view, saying activity has picked up since December 2018 and the first quarter of 2019 has been better than a year earlier.
"The first quarter of 2019 is much better than 2018; things had started to improve from December 2018, not just for us, but for other developers as well. Momentum is picking up and there is a lot of excitement ahead of Expo 2020 Dubai. I believe it is good time to buy because prices are low," he said. "The good thing is that new demand is coming from new buyers. Majority of them are end-user and non-residents from China, GCC, Africa, India and Pakistan."
Azizi noted that some developers offer buyers a business licence as an added incentive. "We like those things so we have done it as well. Dubai has that 'wow' effect and when the 'wow' effect is there the trend will pick up. I still think that it is a good time to buy."
Taimur Khan, research manager at Knight Frank, agreed that demand exists provided developers build the right product, but said it will take a couple of years for the market to move past the supply glut. "People are looking at Dubai as a long-term play. A lot of residents are thinking that it is a time to go for a property buy. If you're here longer than 2 years and 3 months, it makes a lot of sense to buy property with the kind of payment plans being offered in the market," he added.
Outlook
Azizi predicted that an apartment costing Dh1 million now will be worth about Dh1.1 million by December 2019. "Prices will be 10 per cent more expensive, provided it is a good location project." He expects properties close to Sheikh Zayed Road, such as Downtown, Dubai Marina and JBR, to see good demand over the next 5 to 10 years.
Knight Frank's Khan sees the Downtown extension, DIFC 2.0, Business Bay and Jumeirah as interesting developments likely to perform well over the next five to 10 years. "If developers can rightfully match demand with the supply, then there is no reason why we can't see prices rising at slow but stable rate in the coming years. In 10-years, if we can get CAGR of 3-4 per cent, we would be happy," he added.
