2012 will always be credited as a year of celebration, optimism and robust recovery in the history of Dubai real estate as it brought various good news related to the performance of this sector. Local and international investors, who had lost confidence on Dubai realty sector after economic crunch, flew back to Dubai to complete several property transactions during the previous year. The sector's growing performance also impressed and encouraged newbie investors to enter into the sector with renewed confidence. Property prices, which had fallen by more than 50% during the course of 4 years since 2008, finally showed an upturn during 2012.
Performance highlights of 2012 revealed that the prices of villas and apartments have increased by 21% and 7-8% respectively. This increase predicts a prosperous future and can pave the way for robust recovery ahead in 2013. However, there some are experts who believe that re-inflating property prices and launching of grand property projects has its own set of risks. As per these experts, officials and developers should adopt a cautious approach otherwise the recovery will be slowed down in 2013. Let's discuss the factors that are slowing down the process of recovery in Dubai real estate sector.
Oversupply!
Residential real estate sector of Dubai will continue to experience an upturn in 2013 but the growth pace will be slower compared to 2012 due to the delivery of a number of residential projects across Dubai. With various property projects at different secondary locations, the recovery is expected to extend to wider areas of Dubai, which was previously limited to only prime neighbourhoods. At the same time, around 50,000 property units will be added to the supply line in the coming three years. It may not make some difference now but the fact is that Dubai is already under the pressure of oversupply. More property projects in secondary locations may lead to a decline in the rents or property prices, which can also affect rents and prices Dubai property for sale in posh areas.
Grand Property Projects are Back!
With stability in rents and sale prices of Dubai properties in the year 2012, 2013 is predicted to be a year of robust recovery and Dubai has also rediscovered its appetite for grand and gigantic property projects. Projects like the replica of Taj Mahal, the world's biggest Ferris Wheel and the expansion of Dubai Mall, to name a few, are in queue. One should not forget that Dubai is still struggling hard to come out of the bust and shake-off its effects so the strategy to impress the world with the world's largest, tallest or biggest buildings should not be adopted right now. This strategy led the UAE real estate sector to the verge of bankruptcy in 2008.
Over Confidence!
2012 has revealed that property transactions were 49 percent up compared to the number of transactions that took place in 2007. At the same time, 70 percent property purchases were made using cash as buyers avoided mortgage in 2011. Most of these investors were the ones who had adopted "wait and watch" strategy and invested their money in Dubai real estate sector only when they were absolutely sure that the time was right.
As per the current situation however, it can be said that the forecasting growth based on these statistics is nothing more than overconfidence, which can adversely affect the sustainable growth of the sector in the upcoming years.
If Dubai government and officials will take a cautious approach, not only will the sector recover fully in 2013 but it will also achieve its original highs.
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