Dubai cools but market optimism remains
Property values slipped by almost 0.3 per cent in Q3 2014, followed by a further 0.5 per cent drop in the final three months of last year. As a result, prices rose just 3.4 per cent in 2014, down from 51 per cent in the previous year.
The slowdown is a result of the government's cooling measures designed to deter speculative investments and avoid a property boom. Now, many experts consider the market to have slowed down completely.
"The government’s measures have assisted the market in moving towards price and rent normalisation and steering clear of a build-up of speculative bubbles," comments property portal Bayut.com.
The portal, though, claims that the notion of a slowdown is "over-analysed", citing figures that prime property prices have lost "a mere" 1.9 per cent of their value in the six months ending March 2015.
On the other hand, the real estate sector in Abu Dhabi continued with its steady pace, garnering interest and trust of investors looking for market stability.
"The dip in oil prices has hardly restricted the government from initiating new infrastructure development projects, though the opportunity the emirate currently offers are enough to magnetize investors," says the portal's market report.
"Cityscape Abu Dhabi 2015, held in April, saw 81 per cent of developers launching new projects at the exhibition. The prominent developers announcing projects at the event were Abu Dhabi Urban Planning Council (UPC), Department of Municipal Affairs, Tourism Development & Investment Company (TDIC), Zaya, and Al Forsan Real Estate. The new pipeline that aims for 2030 makes the emirate a haven for long term investors."
Activity in Dubai, meanwhile, is expected to slow.
"As the push and pull dust settles, investors are likely to sit tight on their investment in anticipation of 25,000 new units slated for entry into the market this year," says Bayut.com.
Nonetheless, there are factors that may yet boost sales.
"The Dubai government issued more than 200,000 work visas in the first quarter of 2015 alone, meaning many of these units will be absorbed without breaking a sweat," notes Bayut.com.
Clulttons' spring outlook report for Dubai, meanwhile, highlights the impact that affordbale housing is set to have upon the market.
Indeed, with the introduction of the Federal Mortgage caps and the doubling of registration fees, genuine buyers were "forced into a holding pattern" as they attempted to make the transition from rented accoommodation to owner occupation.
"It is unclear how the authorities will implement affordable housing quotas, but for developers, the prospect of diversifying their books with income producing assets in a rental market with buoyant long term prospects should be welcome," predicts Cluttons.
"The introduction of this asset class in Dubai is likely to bring a surge in institutional investor interest."
"With Iran remaining on the verge of a normalisation in global relations, we expect to see a number of international businesses take up position in Dubai to service any expansion into Iran," adds the agency.
"The resultant impact will be a rise in office demand, job creation and therefore demand for accommodation, although this is still too early to assess."