The problem with Dubai property forecasts

It pays to do your own homework when analysing the Dubai property market, says Courtney Trenwith
By Courtney Trenwith
Fri 02 Sep 2016 12:23 AM

My mum always said, if you want something done properly do it yourself. Analysing the Dubai property market could be one of those tasks.

With a continuous stream of reports, analysis and forecasts, you could believe there is plenty of available information to decide whether to buy or sell or sit tight.

But for many of us, when each new commentary is released, the picture becomes more muddled. Take the current selection: while most market analysts say sale prices have fallen, they differ on their figure of by how much, and whether certain areas have fared better or worse. Just don’t ask them when a recovery is likely to begin …

A few argue the market is already on its way up, and others suggest that a turnaround is imminent.

Chestertons UAE managing director Declan McNaughton, for example, claims the volume of sales transactions at his agency has risen by 20 percent in the past six weeks and that he expects it to increase even further during this quarter. The uptick in demand will presumably cause an increase in prices.

The organisers of Cityscape Global, held at the Dubai World Trade Centre this week, also argue that now is “the right time” to buy property in Dubai – that window of opportunity before prices start an upward trajectory.

They claim there is a “strong relationship” between transactional activity and real estate prices, with a lag of six months. Given residential sales volumes “levelled off” at the end of 2015 (ie. six months ago), Cityscape organisers insist that means prices will imminently begin to rise.

But analysts such as Core Savills and CBRE suggest there is more to be cut before a recovery will begin.

With so many people with so many varied opinions, the only real way to glean any kind of reliable assessment of the market is to source it from those on the ground, and that is where Cityscape can be a valuable event.

Putting aside the grand announcements (which can all too easily be quietly amended later on) and expensive showcases, the sheer size of the event can provide a measure of sentiment as good as any office-created report.

This magazine has in recent weeks interviewed several foreign developers who have returned to the market eight years after being stung by the downturn that cost many millions. In this edition, Shaikhani Group managing director Mahmoud Shaikhani reveals his family is rejuvenating its interest in Dubai real estate with a plan to invest nearly $1bn.

These examples at least paint some colour on the landscape.

Those who remember the fallout of the property crash of 2008-09 may take less comfort in the knowledge that domestic developers are ploughing ahead with grand master developments, but they would be missing some additional, finer strokes. The sector – whether buying off-plan or completed, in cash or with a mortgage, or even renting – is working with stronger foundations following the implementation of tighter regulations, which should prevent the significant highs and lows, not to mention failed projects, of years gone by.

That reduced volatility itself should provide some cushioning to those who do venture into the real estate market. At the end of the day, any investment is a risk. Only thorough research can help to minimise that risk.

So when the plethora of statistics and analyses released by others makes any conclusive evaluation difficult, you could do well to wipe the slate clean and form your own interpretation. This week should be a prime time to begin that work.

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Last Updated: Sat 28 Jan 2017 04:16 PM GST

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