Investors take fresh bashing in Dubai market as house price slide deepens
It is another round of knocks for investors in the Dubai housing market as the market has slumped again such that during the year to April 2015, property transactions, both in number and value, plunged by 51.8 percent and 37.1 percent respectively.
The favourable land policy in the United Arab Emirate (UAE) country which allowed foreign easy access to land, attracted investors from many countries of the world including Nigeria to commit millions of dollars into investment in the country’s real estate which burgeoned during boom days of 2006-2008.
Abdul Rahman Kadiri, the MD/CEO of Arkgold Properties Limited who was a vendor in Dubai during those hay days told Business Day in Lagos that some Nigerians who bought some apartments from him at 1.8 million Dirham (about $491,000) each, sold same apartments after eight months for 3 million Dirham (about $815,000), representing about 85 percent value appreciation.
Kadiri explained that because of the global stock market meltdown at the time coupled with the crash of property markets in Europe and America, “many investors are therefore, bringing in money from these locations to invest in Dubai because they see stability and increase”.
“We keep telling our friends in Nigeria that Dubai property market is one of the safest and best investment portfolios. Right now, there is good appreciation because stocks have crashed worldwide, properties have crashed in Europe and America, but Dubai property is still very stable and in upward swing. So, anybody who enters the market now is still going to make it”, he assured.
According to him, what was driving price up in Dubai was that there was high demand whereas there was shortage of supply, explaining that 70 percent of multinationals that moved their businesses to Dubai did not have accommodation either for offices or for residence.
That was the story then and, though the market has seen upward and downward swings in-between, the reality now is that demand is low, prices are down and the market is festered with high vacancy rate.
Global Property Guide says Dubai housing market is known for its volatility adding that the market has been one of the world’s most volatile and, from Q3 2008 to Q3 2011, saw one of the world’s worst housing crashes with house prices plunging by 53 percent.
The Guide, a research house and website dedicated to residential property, covering market trends in 101 countries, in its Q1 2015 global property report noted that the Dubai housing market started to recover in Q2 2012 with double-digit house price increases.
“Demand is now plunging. During the year to April 2015, property transactions, both in number and value, plunged by 51.8 percent and 37.1 percent respectively”, the report revealed, quoting real estate consultant, Jones Lang LaSalle, and the ratings agency, Standard & Poor’s, as expecting that average house prices in the emirate could fall by between 10 percent and 20 percent this year.
The International Monetary Fund (IMF) predicts that due to falling oil prices, the UAE’s economy is projected to expand by only 3.1 percent this year, after GDP growth of 3.6 percent in 2014, 5.2 percent in 2013, 4.7 percent in 2012 and 4.9 percent in 2011, adding however, that because Dubai has a more diversified and less oil dependent economy, it is expected to grow by about 5 percent this year.
CHUKA UROKO