Property prices in Dubai are expected to drop 11.3 per cent on average this year, but the slide is expected to slow down in 2020 and the market will see five to seven per cent correction as demand rises, latest data shows.
With market hitting nearly seven-year low after shedding 23.4 per cent of value in past five years, industry executives and analysts believe that Dubai property has emerged as a mature market. They said returns on property investment will come down to a more practical and realistic level as the market achieves stability next year. Areas, which are approaching nearly 90 per cent maturity, are holding very well price wise.
Haider Tuaima, head of real estate research at ValuStrat, says the average price per square foot approached 2012 levels, falling below Dh1,000. As a result, an emerging trend of annual growth in sales transaction volumes has been observed, he said.
"Properties are being picked up by investors and end-users alike and at record quantities. And it reflected in the ValuStrat Price Index, which declined at a slower rate of 0.8 per cent on a monthly basis in October," he said.
"High-end properties have proven to have more resilience when facing current market headwinds. The price decline in residential properties is expected to continue in 2020 at a slower pace when compared to this year," he added.
Figures have already started to show pickup in sales. Real estate data provider Property Finder said last week that October was a record month for Dubai property sales as there were 4,774 overall property sales registered with the Dubai Land Department in October 2019, the highest since 2008.
Tuaima believes that investors looking at the highest yield returns in Dubai should target low-mid income households, particularly smaller apartments located in International City, Discovery Gardens, Dubai Production City, Remraam, Jumeirah Village, The Greens and Dubai Silicon Oasis.
Iseeb Rehman, chief executive officer of Sherwoods International Property, believes the local property market will continue to face tough time. He said the returns on property will have to come down as the market matures over a period of time.
He noted that the yields in areas such as Jumeirah Village Circle are still high because capital appreciation is not as apparent. "Areas like Marina, Palm and Downtown, which are pretty much coming to 90 per cent maturity, offer low yields but the capital is holding. There is a base value already," Rehman told Khaleej Times in an interview.
"Overall, the occupancy level will start filling up next year as the building completion and handover starts slowing down. The only sensible thing is that developers and property owners have to get realistic in terms of what level they are looking to achieve. If they're within the market norms, the buildings fill up very quickly," Rehman said, adding that the dip is going to continue on a scale yet.
Abdul Rauf Razzak, managing director of Riviera Group, says returns have gone down but average return is still eight per cent.
"Dubai market is maturing and you still make good returns. Around 8-10 per cent return is still there for developers," claims Razzak, who is planning to launch two new projects in the emirate.
Razzak is quite optimistic about the outlook for the property sector, thanks to growing population in the emirate.
"With the world population growing, you will never go wrong in real estate. As the saying goes, property can be sicken but will never die. Even if I just own the land, there will be more population here in the next 5 years. And considering all the infrastructure being built, you can't go wrong here," he said.
He stressed that this city always surprises everybody. "In 2002, when JBR was coming, there was a worry that so many apartments are coming up. But nothing happened and the market absorbed the supply," he added.