Whether you are buying or renting, Dubai’s property market is always a hot topic of discussion for UAE residents. But the highs of the first half of 2014 are unlikely to be replicated in 2015 according to industry analysts. Instead a period of stabilization is expected – good news for tenants and buyers but perhaps not such good news for landlords and sellers.
When it comes to buying, the mortgage caps introduced by the Central Bank late in 2013, coupled with an increase in transfer rates by the Dubai government from 2 to 4 percent, have contributed to the calming in the market in 2014 with some experts labeling the shift in prices as a market correction.
Now analysts believe that the oil price crash will impact house prices in Dubai further as investors adopt a more cautious approach. According to figures from the Dubai Land Department, the total volume of real estate deals fell by 15 percent in 2014 compared with 2013.
Property agent JLL said villa prices fell 1 per cent during the last quarter of 2014 while apartment sales also remained flat. Looking at 2014 as a whole, however, the picture is a little rosier – villa sales recorded average increases of 12 percent and apartment sales of 23 per cent but the majority of that gain took place in the first half of the year when the housing boom was still in full swing.
Dubai’s rental market experienced a similar downward shift towards the end of 2014. According to CBRE, prices are forecast to have risen by 7 percent last year, compared to the 24 percent hike in 2013. Again, most of that rise came in the first half of the year with the last quarter recording a rental price stabilization.
With the low oil price and up to 25,000 new properties hitting the market in 2015, the housing slowdown is expected to continue this year and prices could potentially soften further. It could see tenants negotiating a rental decrease rather than stressing over how much their rent will rise by.
However, as the market levels, landlords are still doing their best to lock in rents for the next 12 months while they can. Anna, from the UK renting a two bedroom in Dubai in Marina has been negotiating rent with her landlord “My landlord will only agree to renew my contract if the rent is increased by 30%. I checked the RERA calculator and found out that he could only increase the rent by 15%. But since he gave me a notice to leave the property at expiry of contract, if I do not agree to his demands, I will be forced to find another place.”
The practice of evicting tenants in order to gain a higher rent – under the pretense of selling or to move in themselves (one of only a handful of reasons a landlord can legitimately evict a tenant) also abound.
But this practice does not always pay. Anecdotally, residents talk of being kicked out of their homes because their landlord claims to be selling – only for the property to sit empty for months as the landlord attempts to secure a much higher rent. Not exactly a cost-effective way to manage an investment.
Is it better to have an empty property with no rent for a few months in the hope of a future higher rent or a steady return on the investment?