Dubai property rebound driven by strong fundamentals

05 September 2013

Population growth and improved economy are driving demand

The rebound in Dubai’s housing market is being driven by much-improved fundamentals rather than the flipping of off-plan properties that fuelled the 2008 boom, according to a new report by the UK’s Standard Chartered.

Beginning in 2009, Dubai housing prices crashed by more than half, but the market has enjoyed a stronger-than expected rebound over the past two years as confidence has returned to the market.

This time around, the boost in real estate prices is not a result of speculators in the market, but factors such as Dubai’s growing economy, an increasing population, and the prospect of the city hosting the World Expo 2020, the report said.

“The key difference between the real estate market in 2008 and in 2013 is off-plan sales. Flipping of off-plan properties was the main reason behind the previous boom-and-bust cycle. Authorities are deploying efforts to ensure that off-plan sales are controlled,” the report said.

A number of factors are limiting the possibility of another bubble, Standard Chartered said, including subdued mortgage growth, low-off plan sales, increasing housing regulation, and controlled increase in supply.

The report contrasts with a recent note from the Washington-headquartered IMF, which warned that the government might need to step in to prevent another boom-and-bust cycle.

But while noting that there is a risk that the market could see a rise in speculation, Standard Chartered concludes that ‘there are no serious indications of a speculative bubble in the housing market’.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.