For the past few months the only topic that seems to have been on anyone’s lips is whether or not Dubai is heading for a real estate bubble in the vein of that which preceded the 2008-2009 crash.
The reality is though that much of this chatter from various stakeholders (estate agents, consultants and, bizarrely, even regulators) seems intended to keep ramping up prices which are broadly estimated to have soared by about 20 percent in the last year.
In its latest market analysis, Jones Lang LaSalle forecast that prices would return to their peak 2008 value as early as this year, while reassuring that there was no bubble. Others including Knight Frank and Asteco have peered into their crystal balls and made similar conclusions. Sounds too good to be true for speculators.
Even Dubai’s property market regulator has been eager to fan the flames, claiming that prices could rise by up to 40 percent this year, but again while quelling fears of possible overheating.
Like economic forecasting, predicting what real estate markets are going to do is next to impossible (ask anyone in Ireland).
Healthy rises in property prices are a good indicator of economic growth, as higher values means more people looking for homes, which means more jobs, meaning more income, meaning more spending, resulting in more growth.
Like the wider economy, the housing market is subject to external shocks that can quickly nix growth, ranging from sudden spikes in oil prices, to natural disasters, to stock market crashes – both on a local and international level.
There are other uncertainties about Dubai’s housing market. While a plethora of new so-called megaprojects are in the pipeline, developers have not been forthcoming about timelines and, more importantly, financing. Given Dubai’s still hefty debt obligations, the latter point is especially pertinent. There is also the question of how regulators will act. They have already increased transfer fees in a bid to deter speculators, and have strongly suggested that more rule changes are to come.
Until more of this becomes clear, the endless hype surrounding the market is unhelpful.
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