The problem with Dubai property forecasts

It pays to do your own homework when analysing the Dubai property market, says Courtney Trenwith

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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Posted by: Fentoni

"My mum always said, if you want something done properly do it yourself". .. Lets hope you never need a wisdom tooth removed then.

Posted by: Informed

Dubai is a temporary home for many.
Once again, Temporary.
It can never be compared with other markets where the supply can be absorbed by local demand.

Posted by: #wagthedog

I have stopped believing ANY of the locally dispersed information on UAE property as it is clearly placed to avoid a complete disaster on multiple levels. I have for the past 10 years witnessed the discrepancy between facts and fiction first hand as part of the industry. I have come to use RERA rental range indicators, news about never heard of Canadian business groups taking over Dubai Pearl, Sales price decreases by "0.2% (!!!)", daily news about "sold out new project launches on the first day", "DISTRESS DEALS", Brokers (who by the way will ALWAYS SAY ITS THE RIGHT TIME TO BUY) predicting "market bottoms" etc. for what it is: PURE ENTERTAINMENT - funny yet sad at the same time; poorly researched most of the time and COMPLETELY useless for making an investment decision. Yup, i would dare to say it's about as useful as a waterproof teabag! I honestly feel for those who believe yet another completion date or GUARANTEED yield promise. But Hey, people believe what they want to...

Posted by: Jimbob

100% agree - the staggering amount of air time given to people with a vested interest in generating buzz in real estate always amazes me. Almost on a daily basis there are numerous "reports" published in various media outlets claiming all the points you mention above.

They are often poorly written, ill researched, jargon filled, contradictory, opinion pieces which ignore the negative and try to accentuate any positives they can glean.

On one hand a developer claims a sold out project on day one, yet they're slowing new releases to a crawl because they're struggling for buyers. You do the maths.

The real estate market here is still in pre school in global terms - there's nothing wrong with that but the sooner the market is allowed to mature naturally (supply and demand) the better it will be for the market overall.

Posted by: Karel

There is other factors that contribute to this statistics which include the moving in and moving out off expats which there is very little information available off. Looking around I see many units empty and owners struggling to sell as there is so many to choose from in the market. This clearly indicates a buyers market which allows you to negotiate but is it a good investment. Well like you said its always going to be a risk. Hopefully more investment will be made to the mid market as this is where the largest volume off people fall in and where the need is currently. Keeping a cautious eye on developments

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