Transactions in Dubai's property market increased in the first two months of 2019, a sign of green shoots, as lower prices attracted new buyers despite oversupply and developers reported good numbers.
What Is Bringing Buyers Back
"In the first two months of 2019, there is increase in the 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).
Speaking on the first day of the three-day International Property Show at the Dubai International Convention and Exhibition Centre, she added: "Dubai's property, real estate infrastructure as well as investors are pretty matured now." Transactions in the first 11 months of 2018 totalled Dh194 billion, with Dh62 billion of investment between January and November.
A Good Time to Buy
Farhad Azizi, CEO of Azizi Developments, agreed that the market has picked up since December 2018, with the first quarter of 2019 ahead of last year's.
"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."
Some developers now offer a business licence with a new home as an extra incentive, Azizi said. "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, said demand is there if developers build the right product, although Dubai's real estate market will take a couple of years to get 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.
Atif Rahman, director and partner of Danube Properties, expects existing inventory to be absorbed by winter as demand rises, possibly leaving too little supply 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 will keep attracting investment however supply and demand change. "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."
End Users Drive the Secondary Market
Property Finder figures show off-plan properties made up 55% of transactions in the first two months of 2019 and secondary-market deals 45%, with 3,069 off-plan homes and 2,463 resales changing hands. In earlier cycles off-plan sales dominated by a wide margin, so this unusual balance indicates that Dubai is no longer a purely investor-driven market.
"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 noted.
"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. Year on year, secondary transactions fell only 1.4%.
Palm Jumeirah, Dubai Marina and International City led secondary apartment transactions, while Dubai Hills Estate, Downtown Dubai and Dubai Creek Harbour (The Lagoons) led off-plan deals.
Outlook
Azizi expects a Dh1 million apartment to be worth around Dh1.1 million by December 2019. "Prices will be 10 per cent more expensive, provided it is a good location project." He believes properties near Sheikh Zayed Road, including Downtown, Dubai Marina and JBR, will remain in demand for the next 5 to 10 years.
Khan of Knight Frank sees the Downtown extension, DIFC 2.0, Business Bay and Jumeirah performing well over the same period. "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.
Reported by Waheed Abbas, Khaleej Times (waheedabbas@khaleejtimes.com)
