This was because I myself didn’t believe Dubai to be a property hotspot, and at the time I put its popularity down to the amount of people primarily buying a holiday home, with rental yields and capital appreciation of secondary importance. For the number of people who have bought in Dubai I hope I was right.
Far from being a property hot-spot, according to research by Arab investment banking firm and respected market analysts EFG-Hermes, due to the boom Dubai is currently experiencing the volume of new units coming onto the market in such a short space of time will shortly cause Dubai property prices to plummet.
EFG’s predictions use Singapore as a model, because Singapore experienced a similar boom, and the market being flooded with new property caused prices to crash. EFG’s report said: “We believe the supply-demand forces of Singapore of 2000 to be similar to those of Dubai now.”
Prices fell by 30% in a short space of time during Singapore’s crash, and EFG believe a similar drop is likely in Dubai. However, if new properties are delayed as expected the drop may only be 25%. EFG also believe the oversupply of new units will eventually cause rental yields to drop. Fortunately there is still one thing that may avert this property investment disaster. If Dubai’s population growth rate stays at 5% the demand may meet the supply, but if it, as expected drops to a more reasonable 3% then the above scenario will play out.
It is a great shame for Dubai, as the country has been so excellently successful at attracting investors from around the world, with developments selling out in a matter of weeks, one selling out in just two days. Initiatives like Dubai media city bringing relocation of big media companies such as MBC satellite broadcasters from London, Dubai Internet City bringing in big hitters like Lexmark and Intel, and tax incentives (well, the lack of tax) attracting wealthy investors from other oil-rich Middle East states. Of course the thousands of casual investors who bought a holiday home with investment in mind will be worst affected if things go bad.
Nothing attracts me to investing or living in Dubai whatsoever.
It’s a desert! Building a city in such an inhospitable location is a mad notion. Can you imagine how much energy it takes to live in that environment – to power the air conditioners and to desalinate the water?
Everything there seems to be man-made. There is natural beauty in a desert, but it soon wears off. Why it has attracted so many “investors” is because of clever marketing and promises of impossible returns.
Why would anyone want to live there? If you know, please share it!
The information in this post is right out of date! Dubai property prices are up 10-15% in the past month – EFG Hermes report has been revised and pretty much shown to be nonsense – supply is falling well short of demand and will do so for quite some time. Nothing lasts forever – as for the last comment, living tax-free in a safe, modern environment with servants are the usual attractions.
Don’t buy in Dubai? Are you joking? No one here is walking away with frowns on their faces regarding their investments. Clearly, investing in any market carries no 100% guarantee. Dubai is still experiencing a good healthy momentum and extremely favorable upward appreciation in the property values. No worries for a while. And, regardless of your complaints on how much YOU think Dubai upholds its value as a “gold star” holiday stay or a residence, I think its an amazing place!
10% tax free yeild. 100% capital appriciation year on year over the past 5 years.
You missed out. Not using a eruo or dollar currency. Huge national airlines with access to cheap oil, 365 sunny days a year and the beach is never more then 20 minutes away, all rapped into a tax free enviroment.
Many a millionair has been made here in the past few years. Sorry you missed out, well not really
[...] as I hate to say I told you so, I have to in the case of Dubai. Several months ago I was writing articles advising against investing in Dubai property, because the level of new development was certain to cause over-supply problems, and price falls. [...]
[...] as I hate to say I told you so, I have to in the case of Dubai. Several months ago I was writing articles advising against investing in Dubai property, because the level of new development was certain to cause over-supply problems, and price falls. [...]
Response to DD:
Well, as I have said a lot lately: I hate to say I told you so but…
I never said that many people had not made a lot of money investing in Dubai property, a lot of people made a lot of money indeed. What I said was that the bubble was about to burst, and burst it has, in a big way.
http://www.write-about-property.com/articles/dubai-property-suffers-badly-in-global-downturn-105.php