PC: Arabian Business
At present, a shift in dynamics is taking place in Dubai’s property market, as buyers begin to have more leverage when procuring within it than sellers for the first time in years. The property prices have started to decline recently, so too the developers are cutting their prices, as the housing supply has been rising. In particular, this is the case with the off the plan sales sector where the long enduring offers of developers – such as high commissions – have not managed to stop drop in prices in some indices. Some may comment on these declines being temporary or on the potential need of a revision of the index methodology, but the prices are falling consistently across nearly all segments of the economy for several months, with the trend becoming more pronounced.
In fact, this shift can be explained by another factor: the delivery of over 300,000 housing units over the next four years. Even once accounting for actualization rates the current market has more of them on the MLS than any time since June 2007. Now with competition waning, bidding wars have been on the wane, with developers shopping joint ventures with land banks and making steep discounts for upfront payments to keep cash flow. Therefore, properties that are on the market are taking longer, some indicating the longest period in two years from February 2020.
However, this cooling trend is not found only in Dubai as similar patterns are seen around the world from a 5% month on month decline in sales of existing houses in the US. Dubai has also seen its land prices reduced as well as transaction volume. Off plan and ready property prices have started to converge to more realistic floors. As the buyer exercises his newfound bargaining power, buyers are more proactive in negotiating lower prices, and a great deal more deals are falling through.
The current market environment has increased retail buyers’ selection options which resulted in decreased property costs. Ready homes in Jumeirah Lake Towers (JLT) currently sell at a noticeably lower price than off-plan properties thus demonstrating the increasing cost disparity throughout different real estate areas. Investors exercise increased caution because they understand market patterns and they arrange for the upcoming segment of this business cycle.
Various microeconomic factors shape the way buyers behave within Dubai’s real estate market. The property market now adjusts its focus to examine factors including property dimensions, residential locations, banking regulations for mortgages and financing options as people grow wealthier and the population grows more slowly. Changes in consumer demands have led developers to succeed by modifying their products while partial market margin compression continues.
The Dubai property market now experiences major changes as it became subject to higher supply and decreasing prices accompanied by changing buyer preferences. Market stakeholders need to adapt their strategies because the evolving market demands sustainable growth and investment within the sector.
