Dubai Property Market Boom – Reasons for Continuation
Dubai property market is expected to experience the ongoing boom for longer than most experts believe. There are reasons for Dubai property sector to be on the road to rise since the last few years. Following is an overview of factors impinging on the success of Dubai property sector.
a) Dubai property mortgage rates are about 8.5 percent and still need to get adjusted vis-à-vis US rate cuts. This is inevitable in the wake of the dollar peg to AED. Just a few years back, the interest rates in Dubai property market were as low as 7 percent. Thus the downward pressure on house prices in Dubai property sector. The current rates could go much lower if the mortgage market becomes more competitive. This in turn will make buying Dubai property cheaper than renting the same. Real interest rates are, in fact, already going in the negative direction due to high local inflation.
b) Dubai property rental yields are 7-10 percent which are abnormally high by international norms. It is quite unlikely that rents will fall in Dubai property market. This is due to the obvious fact that the market is booming over the recent years. However, it is more likely that mounting capital values will force Dubai property rental yields to come down to the international standards. In any case, there is no reason for the rental yields to be higher in a booming market like that of Dubai property sector, as compared to a place where the economic matrix is weaker.
c) The demand-supply ration in Dubai property sector is still not balanced. As compared to growing demand, the supply is far less to be able to meet the same.
d) As compared to other cities worldwide with similar salary levels, Dubai property prices, especially house prices, are quite low. This inconsistency will be eliminated once prices rise still more.
e) Dubai freehold started six years back and had no formal legislation in place. It has developed to the level where Dubai property sector now has a government backed regulatory authority along with world-class rules and regulations in place.
f) In 2006, Dubai Financial Market crashed and consequently forced investors towards Dubai property as a lucrative alternative. The financial market recovered by the end of 2007 and is now again on the downward slope. Yet again a more stable market (read Dubai property) will start attracting investments.
g) 2008 has been a year with no stable investment alternatives available worldwide. This in turn has worked well for Dubai property sector since it is seen as an attractive investment option.
h) At the moment, Dubai property sector still has certain undeveloped areas such as holiday lets and fractional ownership, which are big markets in beach resorts around the world. Thus sources of higher rental yield are yet to be fully exploited in Dubai property sector.
i) The most proactive property developer in Dubai has been the government of Dubai. The robust legislation and regulation for the Dubai property sector has ensured that the market will withstand any adverse developments.
a) Dubai property mortgage rates are about 8.5 percent and still need to get adjusted vis-à-vis US rate cuts. This is inevitable in the wake of the dollar peg to AED. Just a few years back, the interest rates in Dubai property market were as low as 7 percent. Thus the downward pressure on house prices in Dubai property sector. The current rates could go much lower if the mortgage market becomes more competitive. This in turn will make buying Dubai property cheaper than renting the same. Real interest rates are, in fact, already going in the negative direction due to high local inflation.
b) Dubai property rental yields are 7-10 percent which are abnormally high by international norms. It is quite unlikely that rents will fall in Dubai property market. This is due to the obvious fact that the market is booming over the recent years. However, it is more likely that mounting capital values will force Dubai property rental yields to come down to the international standards. In any case, there is no reason for the rental yields to be higher in a booming market like that of Dubai property sector, as compared to a place where the economic matrix is weaker.
c) The demand-supply ration in Dubai property sector is still not balanced. As compared to growing demand, the supply is far less to be able to meet the same.
d) As compared to other cities worldwide with similar salary levels, Dubai property prices, especially house prices, are quite low. This inconsistency will be eliminated once prices rise still more.
e) Dubai freehold started six years back and had no formal legislation in place. It has developed to the level where Dubai property sector now has a government backed regulatory authority along with world-class rules and regulations in place.
f) In 2006, Dubai Financial Market crashed and consequently forced investors towards Dubai property as a lucrative alternative. The financial market recovered by the end of 2007 and is now again on the downward slope. Yet again a more stable market (read Dubai property) will start attracting investments.
g) 2008 has been a year with no stable investment alternatives available worldwide. This in turn has worked well for Dubai property sector since it is seen as an attractive investment option.
h) At the moment, Dubai property sector still has certain undeveloped areas such as holiday lets and fractional ownership, which are big markets in beach resorts around the world. Thus sources of higher rental yield are yet to be fully exploited in Dubai property sector.
i) The most proactive property developer in Dubai has been the government of Dubai. The robust legislation and regulation for the Dubai property sector has ensured that the market will withstand any adverse developments.
Labels: dubai, dubai property, property
posted by Property Reporter at
12:52 AM
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