However, the same report reports that growth slowed down in the first quarter of 2014, bringing real estate prices to a more realistic level of a 10 – 15 percent increase.
Another article from Bloomberg gives the case of a real estate agent having done no transactions in a month. Not really surprising; Souqalmal.com data on mortgage searches reveals an interesting story…
While visits to our home loans landing page have tripled in the last month, the number of mortgage queries to banks has actually decreased. What does this tell us? UAE residents still have the appetite to buy a home in Dubai – but the combination of stricter rules on deposits, transaction fees and an increase in house prices are all hurdles. Prices have become too high for residents to afford and they fear another crash.
To add to that, sellers and Dubai property owners are hanging on to their assets in the hope that prices will increase even further before they release their properties onto the market. However, every market has to be a happy combination of buyers and sellers… and I am afraid we have run out of buyers at this point.
So, is it the time to buy now? I argue that the growth rate is not sustainable and prices will eventually stabilize, as already seen in Q1 2014 with a decrease in growth. At some point, sellers will realize that Dubai is close to the peak of the real estate cycle and will want to get out of the market – leading to an increase in the supply of property. And that’s in addition to the extra 10 – 20 percent of new supply coming on-stream (according to Jones Lang LaSalle, Q1 2014).
I would probably wait a few more months as new supply hit the market and owners come to the realization that another 20 percent increase in house prices is probably unsustainable – a realization the UAE Central Bank also seems to have come in the first official warning about the overheating market.