After two and a half years of surging increases in the value of property in Dubai, average rents and sales prices are finally correcting themselves. Hurrah! This is undeniably great news for buyers, tenants and the market – but why is it happening, and how can it really benefit you? Clementine Malim, from Ascot and Co., reveals all you need to know about the property market in Dubai.There are many contributing factors to the downturn in prices in Dubai. Until recently, there seemed to be no end in sight – prices continued to rise quarter on quarter, but essentially, these increases weren’t sustainable in a stable and mature market.
This quarter shows a two per cent rental decline for apartments, while average villa rents fell three per cent. On the sales front – from July to September – average apartment prices fell one per cent and villa prices dropped four per cent across Dubai.
The Dubai Land Department initiated the cooling period with the October transfer fee (a government tax) increasing from two per cent to four per cent, making it more expensive for investors to find a ‘quick win’ in the market. This was followed shortly by the new mortgage cap implemented by the UAE Central bank, to further curb the rising property prices. This affected the amount buyers could borrow – 75 per cent on properties under Dhs5,000,000 and 65 per cent on properties over Dhs5,000,000.
So, including the four per cent Dubai Land Department transfer fee and the agent’s two per cent fee, buyers could be having to front 31 per cent to 41 per cent of the property’s value in cash. That’s a huge amount of money for families to have available.
We are beginning to see a better balance of supply equaling demand. With over 19,000 new homes expecting to hand over next year and an impressive 27 new projects launched at City Scape, Dubai’s real estate market shows no signs of slowing down. With a more balanced equation, it means vendors have to be more realistic with their selling prices. A positive sign that the market we are now in is sustainable, realistic and here to stay.
Having seen the investor appetite drop off slightly this isn’t to say the end user market isn’t active. The prices are finally becoming more realistic and it’s making way for homebuyers to get their foot in the door.
As an agent, the last nine to 12 months have felt slow, with vendor’s prices still high and buyers unable to afford to purchase at this level. There has also been an air of uncertainty in regards to what the market was going to do, which has certainly had an affect on people’s confidence in buying. Recently however this seems to have changed. The price correction has leveled out the market and the last three weeks have seen a rise in activity. The motivation to transact is now there at a price suitable for both parties, allowing agents to facilitate very open conversations, bridging the gap between buyer and seller and resulting in sales taking place.
This all sounds reassuring and encouraging, but how can it really benefit you? Firstly and most simply, it’s cheaper to buy now than it has been in the last two years. But for me, the traditional reasons for buying are what I believe motivates most of my clients. Dubai continues to be a thriving business hub and wonderful home for many expatriates. `Most come for five years or more and logistically it can work out cheaper to buy than rent.
But emotionally, and the reason that resonates most with me, is the opportunity to make a home here. As we know, rental rates are high and landlords can be prone to selling the properties we tenant just as we are settling in. Buying gives us the security and freedom to decorate as we wish, adding kitchens and bathrooms and really making a home for ourselves.
If you are here for the long run, or even the short term, and are considering buying a home in Dubai, for most of us a mortgage is needed. The UAE’s Central Bank Q2 Credit Sentiment Survey showed that banks and financial institutions’ willingness to lend had increased healthily in the three months to June 2014. Banks are competitive, and rates are good. It can be beneficial to speak an independent mortgage advisor, there are a few fantastic companies in Dubai offering this service. With their help you are able to compare over 30 banks and in turn usually search out the best rates.
To summarise, here are my top tips for buyers, renters and sellers:
- Finance. Fully know your budget before starting the journey. We always recommend working with an independent mortgage advisor, they can often come up with innovative ways to make your money go further.
- Imagination. Leopard print floors? Pink walls? Use your imagination! Upgrades are just temporary, look beyond the decoration. Do you like the house, the plot, the area?
- Agent. Make sure you find a good agent. One that is attentive to your needs, fully understands your brief and knows the processes of buying inside out.
- Don’t hesitate. We are entering a buyers market and the good properties that are priced right are still selling fast. So if you like a property, make it known to your agent and don’t hesitate to make an offer!
- Location, location, location. The road system in Dubai is constantly developing, making communities that once seemed isolated now easily accessible. Don’t’ be afraid to look further afield, where you may get more property for your money.
- Landlords. With more stock coming online, landlords are a lot more flexible than previous years. Whether it’s price, number of cheques, or simply having the place fixed up. Don’t be afraid to ask!
- Be ready. The rentals market is fast paced, be fully prepared to offer on a property if you like it because before you know it, it may be gone!
- Renew vs Move. The cost of moving in Dubai is so high, with Ejari, DEWA, DU, it’s often cheaper to stay put. Take this into consideration before making any decisions.
- Renewing. Even with the market prices coming down, in most cases, the current renewal price is more than you are currently paying, always have an open dialogue with your landlord. Sometimes it’s better to pay a little extra now to save a lot more in the future.
- Movers. If you do have to move, unlike the Dubai of old, there’s lots of fantastic companies who can help you move. Shop around for the best deal, some even throw in a free pizza!
- With sellers it all boils down to exposure. With more properties on the market it’s really important that yours stands out.
- Agent. Work with an agent who truly understands the current market and can demonstrate they can get the job done. Make sure you meet them face to face and you’re comfortable they can guide you through this tough market. Lastly pick an agent with good online presence; propertyfinder.ae is always a great gauge.
- Photographs. Gone are the days when an agent can turn up and take pictures with their phone. The better agencies offer a professional photography service. It is so important that your property stands out before they’ve even walked through the door.
- Tidy. Sounds silly, but make sure your home is neat and tidy before a viewing. First impressions go a long way! Sometimes even doing a few minor upgrades can make a big difference.
- Educate yourself. Unlike most markets it’s really tough to know what true market value is. Simply going online and checking out the competition in most cases is inaccurate. When inviting agents to value your home make sure they bring comparables of properties that have recently sold to back up their market assessment. The last thing you want is to enter the market too high or, more importantly, too low!
- Listen. I know no one loves us agents, but sometimes we do know best. Whether it’s putting a ‘for sale’ board outside, redecorating the property or reducing the price, our suggestions are in your best interests.
- It’s vitally important to be working with the right agent. Buying a home is a hugely exciting time but can also be a daunting process. There are a number of fantastic agents working in Dubai, it’s important you pick the right one. They are the ones with the access and understanding of the market. Regardless if you are thinking of buying, renting or selling, your agent needs to be honest, attentive, personable, understanding and have your best interests at heart to really find your perfect property.