What next for property in Dubai, Abu Dhabi and beyond?
Property has been one of the most dazzling investments since the financial crisis as global hotspots attract wealthy investors from all over the world.
Cities as diverse as London, Hong Kong, Jakarta, Dublin, Vancouver, Miami, Sydney and Istanbul have all posted double-digit annual growth figures in recent times.
The UAE has also been swept up in the property bonanza – notably in 2013, when Dubai posting an incredible 51 per cent growth, according to Cluttons.
Easy monetary policy in the shape of record-low interest rates and quantitative easing has fuelled the global property surge by driving up asset prices across the board.
Nothing lasts forever, though. The Chinese crisis, expectations that the US Federal Reserve will soon hike interest rates and widespread government intervention to deflate bubbles have removed some of the froth.
Global house prices increased by just 0.1 per cent in the year to June, the weakest in four years, according to new figures from the international estate agents Knight Frank.
But opportunities still exist. In the week Dubai hosted its annual Cityscape Global property exhibition, here are five property hotspots to consider right now:
After the breakneck property price growth Dubai had in 2013, something had to give.
The Dubai market fell 12.2 per cent in the past year to June, according to Knight Frank, making it the worst performer among the 56 regions it tracks.
But the Savills World Residential Investability Ranking suggests the UAE will soon be on the up again.
Savills ranks the UAE second for residential investment potential because of domestic wealth creation and demographic and regional demand. Only the United States looks a better prospect right now, it says.
CBRE’s new Global Living Report claims the top end of the UAE’s residential market is relatively “affordable” when compared with London, New York or Hong Kong. Prime property in London costs US$3,000 per square foot compared to $1,300 at the very top end of the market in Dubai.
Faisal Durrani, the head of research at the property consultancy Cluttons, says the recent Dubai slowdown is down to government mortgage caps and higher property registration fees rather than economic worries. “Affordability is also stretched, as wages clearly haven’t risen at the same rate as house prices.”
Cluttons figures show that villa prices in Dubai fell 7 per cent in the year to June, and Mr Durrani predicts another 5 per cent to 7 per cent drop in the remainder of the year. “We don’t see this as a crash – rather property finding its real floor. Lower, more affordable prices will allow more people to access the market.”
Apartment prices are stagnant rather than falling, and growing demand should lift them again, he says. “Another 400,000 people are expected to come to Dubai, but there is a pipeline of just less than 7,000 apartments. Prices and rental yields are both likely to head north.”
The off-plan market remains healthy because prices are 30 per cent lower than on completed projects, he adds.
Price growth in Abu Dhabi has been less extreme, but properties have still risen 34 per cent of total over five years – again, faster than wages.
Mr Durrani says Abu Dhabi has been hit harder by the slowdown in oil prices because its economy is less diversified than Dubai. “Federal mortgage caps have also had a significant impact,” he adds. “A family buying a Dh5.5 million home would effectively have to put up 40 per cent in upfront equity, including costs. People don’t have that kind of cash.”
Mr Durrani also picks Bahrain and Oman as GCC countries with good prospects, with Bahrain springing back into life following the political troubles of 2011 and Oman growing in popularity among Indian and Iranians expatriates in Dubai.