The last two years have seen Dubai experiencing a surge in its real estate sector, with an increase in the purchase prices of properties. A spike in demand was observed as buyers and investors were keen to purchase homes. However, after such a long period of escalation, Dubai is now set to experience a dip in property prices for the first time in two years. This may indicate that the market is slowly beginning to exhibit signs of normalcy after the prolonged period of price escalation.
A sudden dip in the price of property can be attributed to a number of factors:
The past couple of years have not been easy financially for many buyers looking forward to owning property in Dubai as extensive amounts of money would need to be spent on purchase. This was great for sellers and developers, but it made owning a home financially difficult for buyers. With high prices, demand began to stagnate simply because people did not have the means to purchase homes. With a decrease in prices now observed, the market is expected to make a readjustment in order for properties to be more reasonably priced.
The market has observed a dip in the purchasing of homes, and after a period of sustained sales, the number of people ready to invest in Dubai real estate has decreased.
While some buyers have already made their purchases, others are still on the fence, predicting further price drops. In times of decreased demand and fewer willing buyers, sellers are forced to decrease their prices to entice buyers. This has led to the recent drop in property prices.
Dubai is widely recognized for its rapid enhancement since the construction of new multistory residential buildings and residential communities is on the rise. An increase in the number of housing projects has now entered the market, resulting in an increase in the number of homes for sale. When the supply of homes exceeds the demand, property prices usually dip. This is a result of competition among sellers and developers who try to outdo each other by lowering their prices or better deals.
This will have varying impacts on different market participants:
This is an ideal situation for investors aiming to penetrate the Dubai real estate market. Lower prices mean properties can be bought for cheaper, therefore yielding better returns when the market recovers and prices shoot up.
Property owners wishing to sell their homes stand a chance of facing difficulty in getting the prices they anticipate.
Some sellers may have to pay more to draw a buyer's interest.
Real estate developers will have to revise their tactics if they hope to sustain sales. Many may consider inducing demand with discounts, favorable payment terms, or otherwise excesses of some perks to differ from the buyer's customers. Also, developers must be prudent in formulating their plans for sales as these projects would more than likely lead to a surplus situation.
As per the real estate analysts, this decrease in prices is not bad at all. Owing to the real estate cycle, it is actually normal. If prices are increasing extremely fast, the market will need to level out at some point. Prices dropping temporarily are a method of controlling an overactive market and preparing the economy for stability.
They also assume that adjustments made can be proved as optimistic later. Neutral economies provide the ability to grow at all times without facing sudden dips, hence controlling prices. This makes Dubai’s property market more appealing for investment, both foreign and local, upon recession.
Property prices in Dubai may decrease for a while but that does not mean it is going to happen forever. In fact, a lower price may draw in new buyers, and that could lead to an increase in demand in the coming future.
Furthermore, the Dubai government may put in place new rules to stop major price fluctuations and keep the market stable. Given that the real estate market is an important component of Dubai’s economy, the relevant authorities must ensure that it continues to perform well and is appealing to investment.
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