Once again, the hitherto sizzling Dubai property market has slumped, leading to as high as 51.8 percent plunge in the volume of transaction and 37.1 percent drop in the value of transaction.
For close watchers of the global housing development, this development has significant impact on the world economy as Dubai has, in the last decade, had individual and institutional investors from different regions of the world come to invest in its expansive real estate market.
The property market in this United Arab Emirate (UAE) country was a destination of sort for high yield seeking investors, many of who flocked and invested in the market, reaping fabulous dividends before the global recession of 2008-2010 that eroded much of the investments in many asset classes.
A favourable land policy in the UAE, which allowed foreigner easy access to land, attracted most of these investors from many countries of the world, including Nigeria, who committed millions of dollars into investment in the country’s real estate that burgeoned during the boom days of 2006-2008.
Dubai housing market is known for its volatility, and according to close watchers of that market, it has been one of the world’s most volatile and saw one of the world’s worst housing crashes with house prices plunging by 53 percent from Q3 2008 to Q3 2011.
Global Property Guide, a research house and website dedicated to residential property, covering market trends in 101 countries, in its Q1 2015 global property report, notes that the Dubai housing market started to recover in Q2 2012, with double-digit house price increases since then.
“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 notes, 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.
During the boom days, the Dubai property market had it so good that returns on investment were mind-boggling with investors getting as high as 85 percent returns on their investment in as short a period as 12 months.
Abdul Rahman Kadiri, managing director/CEO of Arkgold Properties Limited, who was a vendor in Dubai during those hay days, told BusinessDay in Lagos that some Nigerians who bought some apartments from him at 1.8 million Dirham, an equivalent of $491,000 each, sold same apartments after eight months for 3 million Dirham (about $815,000), representing about 85 percent value appreciation.
Kadiri said 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.”
According to him, what was driving price up in Dubai was because there was much demand whereas there was shortage of supply, as 70 percent of multinationals that moved their businesses to Dubai did not have accommodation either for offices or for residence.
That was 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.