Those players who are able to capture the major supply and demand shifts, adapt to them and, consequently, "swim with the current" become inevitably successful on Dubai's real estate market. As the practice suggests, the theoretical forecasts by experts and analysts are not sufficient to capture these trends, as the forecasts are not always realized and following only them may be risky. It is more reliable to capture already existing and obvious trends and simply follow them. Moreover, the statistical and analytical data is more than sufficient for controlling these trends. So, here are the main specifics of Dubai real estate market development in 2016, based on the results of research made by such consulting and analytic agencies as Valustrat, Propertyfinder, Asteco, JLL and some others:
1. The profitability of renting out affordable housing is rapidly increasing
Land Sterling agency reports the average profitability of Dubai housing to be 10.6%, which is higher than in almost all megalopolises of the world. It is worth mentioning that in the least expensive districts, where mainly Indian and Pakistani workers live, the rational approach to buying apartments and choosing tenants allows the owners earning 17-20% of rental income per annum. These numbers form some sort of a booming market, the investors capture this demand and actively purchase inexpensive housing "in wholesale" - the deals of purchasing all apartments on one floor of the building by one buyer are becoming a new norm. According to Cluttons, Sports City and International City have become the most profitable districts, somewhat more prestigious locations like Discovery Gardens provide about 9% of income, while elite districts - around 7-8%.
2. The housing purchase demand is increasing with relatively constant demand for renting it. This is a consequence of the previous trend. Investors buy affordable housing in the peripheral Dubai districts faster than it is built exactly for extracting income in future. By the way, it fosters developers’ activity and increases the number of offers. As a result, the housing prices are increasing slowly and therefore the profitability is rapidly rising. According to Chestertons, the investors’ interest in acquiring real estate in Dubai increased by 28% in the first quarter of 2016 and it is likely to rise further in future due to the expected inflow of wealthy buyers from Iran. By the way, it will contribute to the recovery of demand for elite real estate in JBR, Business Bay, Palm Jumeirah and Dubai Marina.
3. Demand for offices is increasing For the first time over the recent years the demand for offices in Dubai business districts exceeded the supply exactly in the first months of 2016. There are absolutely no available premises in Tecom and DIFC while the offices in Deira, Bur Dubai and JLT are being actively rented out. By the way, the developers commissioned more than 800 000 sq.m. of new premises that already found their new tenants during the same period. It is largely connected with the start of many new businesses in the free economic zones as well as with the willingness of many established businesses to open an office right in Dubai.
The real estate market in Dubai started to be more active in 2016, however in a somewhat specific way: the emphases of investors, buyers and tenants significantly changed. What are the major trends and the most profitable directions here today?
4. The developers are extending the payment terms for off-plan housing programs In some cases, these terms reach 10 and even 15 years, the down payments are often equal to 1500-2000 USD and annual payments are comparable to payments for renting already existing premises. At the same time some companies offer absolutely unparalleled installment plans - there are offers with 100% guarantee for investors and with the possibility of dividend payments to buyers already at the construction stage. No matter how original these measures seem, they ensure inflow of huge funds to Dubai and constant launch of new projects.
5. Dubai remains one of the main hubs for real estate investment in the world According to Knight Frank no other city in the world increases the volume of funds invested into the real estate with such speed as Dubai does. The ambition of many projects and life quality in the city itself is largely reflected in it. Therefore, this trend is not new — it is already several years old, which does not impede serious market players from continuously benefiting from it.
Dubai real estate market development in 2016
Many experts believe these trends set new directions in the market development and will let it return to the growth and development rates, which it showed during the former "fat" years. Obviously, the market will never be the same again, however, it will enter the new growth stage refreshed and altered. Those who adapt to these changes in time will be able (or are already doing it) to skim the cream off them.