Real estate experts are split over the impact granting three-year property visas to some UAE home owners will have on Dubai’s beleaguered housing market.
The decision by the UAE government in June to offer extended visas to owners of properties worth AED1m or more, replacing visas that require renewal every six months, has divided analysts, with some suggesting the move could spur sales among foreign buyers.
“There are certainly going to be people in the world who come from some of these politically unstable countries who would pay a premium for a property if it meant they could get a visa,” said Tom Bunker, investment sales consultant at Better Homes.
“If the new visa rules aren’t going to include people from these politically unstable countries then we’re not going to see a big change in the property market.”
The restriction of the visa to homes worth AED1m or more may see some buyers pay over the odds for a property to ensure they qualify for residency, said Nick Maclean, managing director, CB Richard Ellis Middle East.
“Would someone pay AED300,000-40,000 additionally to get a visa? I think in many places, because of the comfort it would give, I think that would be the case in due course.”
Any boost to the market is unlikely to be seen until the fourth quarter, as buyers hold back for further details of visa regulations, he added.
Rents and prices in Dubai, the Gulf’s worst-performing market in the last three years, have been in freefall since the collapse of the emirate’s real estate bubble in late 2008.
A Reuters poll in June showed analysts believe prices could plummet a further 10 percent as the market is squeezed by nearly a third too much supply.
Poll respondents saw zero chance of Dubai's residential property market recovering in 2011 and gave just a 25 percent chance of recovery in 2012.
The likelihood of residency helping to swing sales in the emirate hinges on whether buyers believe the cost of paying a premium for property in an unstable market equals a fair trade.
“The crux of this issue is whether or not buyers will actually pay a premium just for the visa. This is unlikely because buyers are value conscious, especially now,” said Jesse Downs, director at Jones Lang LaSalle MENA.
The real estate consultancy said in June it expects a further 18,000 new homes to hit Dubai’s saturated market by the end of the year.
John Davies, CEO of Colliers International, Middle East, said he expected banks and government institutions to require independent valuation of properties to clarify which houses qualify within the AED1m and upwards bracket.
“I can’t see property prices escalating just so that people can get a residence visa,” he said.
There are also questions over whether homeowners who bought property for AED1m or more at the height of the property bubble, will now still qualify for a three-year visa now the value of their home has plummeted.
“I would expect them not to qualify if their property values are now below the AED1m ceiling, as the criteria for a visa will most likely be based on current market values not historical market values,” he said.
Recent unrest across the Arab world failed to give Dubai’s real estate market an expected boost, Deutsche Bank said in its most recent report.
Home values declined 1.2 percent in May compared with the previous month and rents fell by 1 percent. Apartment prices slid 1.3 percent in May, while villas declined 1 percent.