of freehold property in Dubai has now started for all nationalities at
the Dubai Land Department in advance of an imminent decree formally identifying
all the zones in which foreigners can hold this title. But the value
of real estate deals involving GCC nationals fell by 11 per cent in
the first half, so will this be enough to boost a slowing market?
month the official Dubai real estate market was only open to GCC nationals
whose title was registered in the Dubai Land Department. Now the land registry
is accepting registrations from non-GCC nationals, although this move has
been widely anticipated and nobody buying a property in Dubai thought that
they would ever face a problem.
comes at a time when the first half real estate transaction figures
from the Dubai Land Department have shown an 11 per cent fall in the total
value of deals done to $2.7 billion, and a 40 per cent fall in the number
of buyers to 1,253 this year.
house prices up 12%
blame rising real estate prices for the decline in transactions. And the
Dubai Government's own real estate prices index, which tracks the per square
foot value of transactions in 20 Dubai districts, is up by 12 per cent
over the past year.
At the same
time investors in off-plan properties report that it is impossible
to sell at a premium on many developments, which was a major source of
transactions even a year ago. Instead, off-plan buyers now have to wait
until completion for any hope of realizing a profit on their investment
or must sell at a loss.
But to have
rising house prices while the market is slowing down looks much more like
a soft landing than anything like a crash. Indeed, there are reasons to
believe that a slowdown in the Dubai real estate sector will be an orderly
For one thing
the Dubai real estate market has been largely driven by equity investment
rather than debt. Property markets generally crash due to pyramids of debt
which are vulnerable to price movements. In short, the banks call in their
loans and crash the market.
is rather different if you are say a Saudi institutional investor with
a deep pocket. You can afford to sit and wait with an empty property
until buyers come along. You might, of course, decide to discount units
to sell them, and not to build any more but this is not likely to be a
property crash of the kind seen in the West.
inflation levels in Dubai will protect the nominal values of Dubai property,
and interest rates are still negative in real terms for those who have
registration open for foreigners is a nice sign that the Dubai realty
sector is progressing as planned but may not do much to stop the slowdown
in progress. However, it is another reason to believe that those expecting
a market crash may be disappointed.
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