How will Dubai real estate prices perform in 2014?
Those who follow the Dubai property market will be well aware that 2013 has been an excellent year for the real estate sector. Despite various attempts by the authorities to cool the market, to varying effect, the price of real estate across Dubai continues to rise although the rate of increase is beginning to slow. So, how do you think the Dubai property market will perform in 2014?
There are many factors to take into consideration when looking at the Dubai property market where the rise and fall at the turn-of-the-century left many people in financial distress. The banking industry took a major hit, property developers disappeared overnight and the once golden market of Dubai real estate was cast into the shadows.
Dubai property in 2013
If we take a look at the general cost of property across Dubai we will see that during 2013 the increase in real estate peaked at 23% in the second quarter. While the third quarter saw a less than expected increase of just 8% we need to take into account the fact that the authorities introduced a number of measures to take the steam out of the market. While some investors would obviously prefer the Dubai authorities to leave the market to its own devices there was a feeling that we could be headed towards another crash if nothing was done.
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Despite the fact that the government introduced a number of measures, such as limiting the size of mortgages available and doubling the property registration fee, there is still great demand for real estate in the region. Perhaps investors have taken stock of the buoyant market in the second quarter but will they return in numbers in the fourth quarter or will the market end 2013 on a relatively quiet note?
Dubai property in 2014
Strangely enough, while the Dubai authorities have been trying to take the steam out of the market for some time now, investors will appreciate this in the long run. In many ways it was the inactivity of the Dubai authorities in 2008 which led to the crash in real estate prices. This had a major impact on the local economy, many expats returned to their former homelands and Dubai was cast into the investment wilderness. However, the region very quickly returned to favour and many investors seem to have forgotten, or chosen to forget, the troubles of 2008.
The simple fact is that property prices in Dubai are 47% above the bottom of the market which occurred in the second quarter of 2009. Although we have seen a year-on-year rise of 53% to the third quarter of 2013 property values are still around 26% below the peak reached in the third quarter of 2008. So while there has been a very buoyant period for the Dubai real estate market, it is perhaps not as hot as some would have you believe?
Conclusion
The stage seems set for a gradual improvement in Dubai real estate prices throughout the fourth quarter of 2013 and into 2014. Thankfully, the authority seem to have learnt at least some lessons from the collapse of 2008 although in reality the performance of Dubai real estate in 2014 will to a certain extent depend upon the performance of the worldwide economy. As we saw in 2008, when many initially suggested that Dubai was insulated from a worldwide economic downturn, no real estate market can swim against the worldwide tide forever.
It will be interesting to see how the Dubai property market performs in 2014 because at this moment in time it is difficult to find somebody who believes real estate prices will fall!