Thursday, August 28, 2014

After recovering from an enormous property market crash, Dubai property market regained its momentum. With strong performance and increased property transactions, Dubai has once again become the world’s best performing property market in the world. Increased property transactions with rising property prices once again raised concerns of another property bubble. The emirate experienced sharp hikes in renting and buying prices of properties during 2008. The price rise was due to excessive short-term speculation activity in the market especially for off plan developments. Speculation was observed due to small percentage of deposit amount. Buyers didn’t need to pay the full price for such off plan projects. Number of buyers didn’t have any intentions of paying installments in future. What they did was to flip property quickly to resell on profits. Such market practices halted 100s of projects that were launched during 2008. Lack of funds caused many developers to stall their projects event without informing their customers. Later property market showed signs of recovery at the start of 2012 which continued and market showed complete recovery at the end of 2012. The progress continues during 2013 but real estate and business sector experienced a slowdown as everyone was waiting for the final result for World event of Expo 2020. The glitzy win of EXPO 2020 has enabled Dubai to gain world attention again. Local and international investors started making huge investments in real estate, entertainment and hospitality sectors to cater millions of visitors, which are expected to be visiting Dubai.

Recent market Scenario

Although Dubai property market has recovered, problem signs can be clearly observed again with significant rise in off-plan sales. It is observed that mega developers are launching expensive mega projects. Multimillion projects like Mohammed Bin Rashid City, the world largest crystal lagoon and a massive golf course community are few mega projects recently launched in Dubai. Projects developers are funding such mega projects after selling off plan units which is again the sign of danger. Despite observing such alerts still there are people who do not agree with probability of re-occurrence of property bubble again. They consider this price raises a result of increase in demand and strong economy. It is also observed that banks resumed drenching money in real estate projects especially during the past few months after the successful win to host the world event. But the huge rises in property prices, surging supply and unsustainable demand are the risky mix. This is the same combination that Dubai has previously faced six years ago. But according to authorities, they have already taken regulatory steps to controls the market. Although the regulatory steps are not strict as compared to other global cities facing the same difficulties like Hong Kong and Singapore.

Leading financial institutions stated that it’s too early to say anything with complete assurance but this is actually the time to take some solid actions to tackle the market before market really encounters with another property bubble again.

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