A more regulated and stable market with fewer speculators is keeping the market from over-heating. Modest growth is not always a sign of a weak market, says Renan Bourdeau, Deputy CEO, propertyfinder.ae.
Two questions I’m often asked these days are “is there a property bubble?” and “is the market going to crash?”
I’m not an economist, just someone who heads a real estate portal – so I’ll share insights from the data we’ve built in-house and, hopefully, they will throw some light on the state of the market.
During the boom times, property prices were going up everywhere – whether it was an A-grade property or a C-grade one. The euphoric sentiment was driving prices higher.
Market is maturing
Then the downturn hit, and Dubai began to be known as the quintessential boom-and-bust destination. Prices fell and thousands of companies went out of business. Brokerage firms did not have the budget to spend heavily on print advertising, and were forced to resort to online advertising to sell or lease their properties. So, in a sense, Property Finder really got its start in a recession.
Since 2008, property values have risen. Last year, in some areas, prices even reached pre-crisis levels, prompting fears that the market was over-heating and had come back too fast. However, since Q2 2014, things have changed – they’re now quite different, compared to where the market was at the same time last year. The market is maturing.
So, is ‘stable’ the new ‘normal’? Looking at data from our site, we see that, while Dubai Marina apartment prices rose steadily between August 2013 and March 2014, values began to stabilize from April onwards, falling from AED 1,850 per square foot in April to AED 1,811 in August this year.
Sellers and landlords need to mature
Today, Dubai’s demographics are strong, the population is growing, tourist numbers are rising and the economy is doing well. A recent Mercer study showed that people in senior positions in the UAE were amongst the highest paid employees in the world. This, coupled with stabilizing prices, could imply a rise in the affordability of homes as well.
There’s also a lot of hype about the Expo, and the event is sure to generate thousands of new jobs and businesses, and get more people to relocate to Dubai. In 2008, the market was driven by hype alone, so the Expo buzz – although over-stated for some – is a positive driving force for the city.
Furthermore, we’re in a more regulated market today. Four new regulations governing brokers are expected to be introduced. And banks have tightened lending; this is keeping the market from overheating.
However, it’s not enough that the market is maturing: sellers and landlords need to mature too. They need to accept slower returns and more regulation, and realize that doubling an investment quickly can also mean losing it quickly.
Slow and steady wins the race
Also, most people think of the investor as being synonymous with a speculator. This isn’t right. There are buyers who may be able to afford to buy a second home outright or to take out another mortgage to get one. However, they may not be looking at selling their property in the short term – so they cannot be called speculators.
Today, we have the technology to generate massive amounts of information. But what we need to do is tell stories based on what the data says. And help people take this data and use it to figure out where to buy or live.
Our vision back when we started in 2005, as it is today, was to be the best partner to the real estate industry and transform it using technology. Our goal over the next few years is to focus on product innovation, smarter search and insightful real estate information. We want this for a smarter consumer.
In 2007, the real estate industry failed to see the signs. This time round, we have to stay vigilant. Modest growth is not always a sign of a weak market; it can be a sign of a mature one. So, here’s to more subdued growth and greater long-term gain. After all, slow and steady does win the race.