Good times are over for Dubai property… and we should be thankful

One of my favourite songs is a George Michael track called “John and Elvis are dead.” It’s about a man who wakes up after many years in a coma, and finds that much of the world around him hasn’t changed a jot.


I thought of this track again last week when visiting Cityscape Global. For the most part, it felt like I had been transported back to 2006, and this tremendous sense of excitement and anticipation as just about every developer in Dubai tried to outdo each other with the scale of their new announcements.  If you believe what everyone tells you at Cityscape, the property market has never been better, can only go up, and will probably never ever go down. Want to double your money in double time? Now is the time. This is the place. This is the market.

We learned last week that Donald Trump is to build a new luxury hotel (best not mention what happened to the last one he planned). Meraas is planning a mega project close to Jumeirah Beach (does anyone remember The Universe?). Nakheel is launching two new waterfront projects (as opposed to The Waterfront, which again it’s probably best we don’t mention).  Even Deyaar is getting in on the act with a repackaged near-$1bn megaproject (best we don’t mention what happened to the former CEO).

But actually, natural scepticism and cynicism aside, a lot has actually changed since 2006 that should give the investment community more hope than fear. Let’s deal with fear first: In July and August this year, the volume of property transactions in Dubai fell 22 percent compared to the same period a year ago, according to a report by CBRE. Knight Frank’s latest research shows that only $13.6bn of real estate investment was made in Dubai during the first half of this year, which is less than half the amount compared to the same period in 2013. It also suggests the huge majority of residential sales are in Dubai Marina, Downtown and the Palm – meaning many of the new projects further out are getting little traction.

Now you could quickly extrapolate that into meaning that the market has peaked, is falling and could even crash. Or you could believe – as I do – that the Dubai market has finally done something many of us have been waiting a decade for it to do: it has matured.

And so to hope: the effect of higher transfer fees and a mortgage cap is clearly working, in terms of limiting speculation of huge rises in prices (which usually leads to huge falls). It isn’t so easy any more to buy or sell. This doesn’t mean there aren’t buyers or sellers or that the market isn’t strong. Dubai house prices rose by 24 percent last year – clearly too much. A modest, single-digit rise this year does not mean the bubble has burst. What it means is that Dubai is now moving in line with other mature property markets such as London and New York.

As for the usual rush of announcements at Cityscape, well this is an unusual city. Population growth in Dubai is estimated at 7 percent up to 2015 and 5 percent a year up to 2025. More people need more homes. The goal of 20 million visitors by 2020 also goes in tandem with the need for 160,000 hotel rooms, nearly double the amount that currently exist.

If you plan to invest in Dubai property to make a quick buck, well, the truth is the good times are over. But gladly, and thankfully, the normal times are back.

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