How long Dubai’s real estate boom can continue is a question that is being asked with increasing frequency and concern these days.
In the past, confidence in the emirate’s property market seemed to be unshakable as prices doubled, tripled, and then quadrupled.
The market’s success was driven by a potent mix of economic and legal factors.
New ownership laws tapped into the latent demand from expatriates who had previously not been able to own property.
In addition, Gulf investors were looking for regional opportunities, banks were lending freely, the global economy was buoyant and oil prices were rising.
Now the story is changing. The market is approaching saturation point and instead of taking advantage of existing demand, new developments rely on projected population growth, which may not materialise.
Liquidity is still there, but it is drying up as a consequence of the seizure of the global money markets.
Gulf investors increasingly prefer to hunt for bargains in emerging markets, and oil prices are retreating.
These factors are likely to mean the growth in house prices will fall back to levels seen in more mature markets.
But the danger is that this could be just the beginning of a more damaging decline.
Slowing growth may eventually lead to falling prices, and investors now fear that Dubai real estate may not be the secure investment it once was.
The region’s bourses have been hit hard by events on Wall Street and investors may decide to sell their real estate investments just as they have done with stocks.
If this happens, the next year will be a difficult one not only for the real estate industry, but for Dubai’s economy in general.
However, so far, the signs are that Dubai will manage
to provide a soft landing for property owners and investors.