A broker’s perspective of Dubai real estate market

The prospects for the Dubai real estate market look increasingly optimistic at the moment. Property consultants are witnessing a substantial growth in the number of inquiries, as well as growth in number of transactions in the first quarter of 2012, especially on the background of the same quarter in 2011. And it’s more than obvious that both buyers and sellers are regaining confidence in the property market. It seems, the Dubai real estate market has already survived the worst.

This shift is deeply affecting the ease of transactions. Buyers are more optimistic in Dubai in comparison to other countries where the market continues to fall or remains low. Now they are willing to buy before the prices rise too much.

Sellers are decisive to take advantage of growing market like we saw in 2008 and they are glad that real estate brokers are able to negotiate their desired sales prices compared to the last four years, when received offers were lower than what they would like to accept.

Many sellers in the past thought that they were being underbid by agents, but this was only caused by the condition of the market at that time. The market determines the prices, not the agents. Sellers are now happy that they have passed through that period. Optimism and enthusiasm is slowly increasing, which turns the business into a much more positive scene.

Real estate brokers have witnessed a significant increase of real estate prices for villas and higher-end apartments. Regions such as Emirates Hills, Meadows, Springs and even Palm Jumeirah (for villas) and Dubai Marina and Downtown (for apartments) have established this trend. Prices for both sales and leasing in the last year have risen in these regions – between 5% and 25% . This is mainly due to a high demand and limited availability. There was a flow of investors buying villas at the bottom of the real estate drop and that stock has slowly dried up. Consequently, this triggered market prices increase as buyers were ready to pay for what they wanted. Nevertheless, this rising demand for villas and high-end apartments appears to come to a halt, and it is difficult to predict whether it will keep on this way or start to go up again. Anyway, this remains to be seen over the next few months. The Dubai real estate market still isn’t in any way stable, but it is very enduring.

Many investors are still coming from overseas including China, India, Pakistan, Russia and Saudi Arabia. There is also a great number of local investors in Dubai and Abu Dhabi. Some investors from Iraq, Iran, Egypt and Syria are also trying to allocate their assets into a more stable economy, because of the troubles within other countries on Middle East and North Africa.

Sellers that sold at the peak are now investing again, and buyers who purchased at the bottom continue their investments. The aim of most investors is 7% return and they are still getting it. With the growing rental prices, Dubai Marina is a very popular area right now, which makes investors there extremely glad. There is a strong demand for renting apartments which only maximises the rental return for those long-term investors.

Flipping property was a great part of the Dubai real estate market back in 2004-2007. Some investors are trying it again even on a smaller scales. Nowadays, however, the likely profit margin makes it risky with investors making around AED 10-20,000 on each real estate transfer. It is much different from the profit margins real estate agents saw in the past, which most certainly will not repeat itself, although the ever-changing landscape of Dubai may bring another surprise.

The laws in Dubai are changing slowly and inevitably since RERA is becoming more vigilant. With the application of the Dubai Property Laws and the support of the Dubai Lands Department, the Dubai’s real estate market is coming on par with the rest of the world. The city still has a long way to go, but change has already been triggered in the industry, with everything from Phase 2 RERA registration for Real Estate Agents to the Dubai Land Department closely regulating the payments made to sellers during the transfer of real estate ownership. There were no such things in 2011 and it looks like more changes are on the way.

Security and protecting sellers, buyers, landlords and tenants appears to be the focal point for every new regulation that is put into practice. The presence of Rental Committee is now much stronger in the resolutions of arguments between landlords and tenants. Tenants now feel as if they are being protected and landlords are now more likely to fulfill their obligations as property owners. These changes aim to create a better real estate market place.

Real estate agents and brokers are now taking their role much more seriously which is having impact on the service levels that clients experience when purchasing, selling or renting property in Dubai.

The real estate prices of today may be different tomorrow. Many tend to believe that now is a good time to buy property in Dubai.