When will be the best time to buy a home in Dubai?
Posted on 29 June 2010 with 2 comments from readers
With the head of the Gulf’s largest construction company warning that the oversupply in Dubai will take at least four to five years to absorb, buyers are understandably wary of committing themselves. But then buyers usually wait until prices have recovered and miss the bargains.
When will be the best time to buy a home in Dubai? Should you wait another four to five years? Certainly the supply and demand equation is not good.
Supply and demand
‘A lot of the new property completed – around 40,000 units this year – will take time to be absorbed. It’s back to the basics of supply and demand, and there will be more projects next year,’ said Arabtec CEO Riad Kamal at the ArabianBusiness forum yesterday. ‘I feel that Dubai will need a minimum of four to five years before it can absorb that supply.’
Yes that is true. But house prices are down by up to 50 per cent, and with hard bargaining and a ‘motivated seller’ you can do better than that. Is it going to get any worse for the sellers or better for buyers?
It is hard to tell. But nobody ever became poor by buying at a 50 per cent discount. It is those who paid the 100 per cent who are in trouble and they will need to be very patient.
The biggest unknown factor is the outlook for the global economy. Dubai is a global trading, logistics and tourism city and its future depends on the rest of the world.
Iranian trade
Short term things do not look good. The Iran sanctions are entering a second phase which is damaging the flow of trade with Dubai. World trade indicators are trending down again as the stimulus packages wear off.
The dreaded double dip global recession could soon be a reality. And that would bring Dubai house prices to a cyclical bottom. Many agents already say that 2011 is the earliest to expect a recovery. But then to get the best deal you have to be ahead of the upturn.
Perhaps that will be in the summer of 2010 or during a hiatus in the Iran sanctions episode. However, credit is flowing back into mortgage lending and that is the beginning of the end in price falls, although they may not be quite over just yet.
2 Comments posted by readers:
These generalisations are probably appropriate for the mass market but the supply demand gap for the type of properties that people aspire to owna nd live in follow a different trajectory.
For example Villa owners in Meadows and Arabian Ranches are highly desired, even more so that the kitschy Palm Island properties by families that seek value and community. These properties are sure to appreciate way ahead of the curve.
Ordinary villas and ordinary apartments at ordinary living communities can continue to be built in abundance and are most unlikley to have any material effect on either sale and rental values of such homes.
The decision to take is whether this is the bottom or close to the bottom for the property you want to buy and beway ahead of the curve 5 years from now.
I would close my eyes and stay with premium Emaar villas.
This is the best property developer that the UAE has ever had,
Ed Note: Could this be where you live?
I would personally not invest until the dust is settled, there are too many uncertainities which are going to have more negative impact on the market, end of the day its everyone’s own personal money so how its best suit them. I am going to wait for next few years to see how it looks or what the future holds.