Topics of the year
The overwhelmingly optimistic forecasts for the beginning of the year for the Dubai real estate market closer to the end of the year gave way to more restrained estimates and cautious forecasts for next year due to the obvious slowdown in the growth rate of the real estate sector in the emirate.
The two main topics for discussion throughout the year were the slowdown in real estate price growth, as well as the overall reduction in the number of transactions and the boom in the construction of new off-plan housing projects, on the other hand. However, for all the urgency of these topics, against their general background, many have lost sight of some less noticeable, but no less significant details, which we suggest you pay attention to.
The first thing that many analysts overlooked was the behavior of end-home buyers in the secondary market and the associated increase in the percentage of borrowed funds used to buy real estate. If the total activity of buyers in 2014 decreased steadily, then the curve for the use of mortgage lending also steadily went up. The total number of loans issued for the purchase of housing in Dubai over the year as a whole increased by 18%. At the same time, the growth in the number of mortgage loans also had its own characteristics associated with the behavior of buyers in the finished real estate market. Contrary to the belief of many brokers in the priority importance of small-sized apartments, in particular studios and one-bedroom apartments, statistics show that two-and three-bedroom apartments are in the greatest demand in the market.
Statistics on mortgage lending only confirms this opinion of experts. So, 37% of all loans issued for apartments were intended for the purchase of two-bedroom apartments, and another 21% - for the purchase of three-bedroom apartments. Thus, the greatest demand for apartments is now observed in this particular segment, which must be taken into account by developers when launching new projects. However, the demand for villas, based on data on mortgage lending, still prevails. Most of the mortgage loans, namely 65% were issued specifically for the purchase of villas. To determine the balance of supply and demand, real estate market analysts usually use the three most important criteria: location, internal footage and price category of real estate.
And if we have already mentioned the growth in demand for apartments with two and three bedrooms (meter factor), then the first and third criteria, location and cost of real estate, are interconnected when it comes to Dubai. The higher the popularity of the area, the higher the price. Thus, such areas and residential communities of Dubai as JLT, Dubai Marina, Sports City and Jumeirah Village Circle, Emirates Living, Arabian Ranches became the most demanded by buyers, and, therefore, the most expensive in the past year. And if JLT and Dubai Marina were simply most in demand among those who wanted to take out a loan to purchase an apartment, then Sports City and Jumeirah Village Circle in this sense took the leading positions in terms of the largest increase in the number of mortgage loans for purchasing apartments as a percentage for the year. Emirates Living and Arabian Ranches, for their part, have become the most sought after locations for villa buyers.
For Rent VS Property
And finally, two other important trends should be mentioned, which if they were noticed by real estate market analysts in 2014, then not all. The first trend is the tendency of an increasing number of real estate tenants to become homeowners. Representatives of the upper middle class of expatriates renting housing in Dubai began to find the cost of rent excessively burdensome for their income. According to experts, the cost of renting apartments and villas in Dubai as a whole for the year increased by at least 24%. And although many tenants are protected by rental laws that do not allow rent increases before the expiration of certain rental periods, many tenants still had to deal with the problem of an increase. Therefore, an increasing number of them are considering purchasing their own housing, which is why demand is naturally growing too. Therefore, this trend should also be considered as an important component of demand. At the same time, this category of buyers, as a rule, has a limit that they determine for themselves to purchase a home. This is an average of US $ 550 thousand - the amount for which you can buy an apartment with two bedrooms. It was this amount that became the upper limit for 85% of all mortgage loans issued in 2014 in Dubai.
The latter trend, which makes sense to say, can serve as a generalized conclusion for the analysis of the leading features of the development of the Dubai real estate market in 2014, as well as an answer to the main fear of market participants. A decrease in the volume of transactions was observed in the outgoing year in Dubai only in the segment of cash settlement, purchase of housing for "real money", as well as in the segment of speculative housing trade. The braking of these market sectors occurred due to timely and effective measures of the Dubai government, which allowed to improve the entire housing market as a whole. Thus, if a slowdown in market activity is observed, it is solely due to a recession in the "unhealthy" sectors, which already require limiting their progress.
You can obtain additional information about the acquisition and management of real estate in Dubai from the specialists of IMEXReal Estate by tel. in Moscow +7 495 5100008, toll-free number in the UAE 800-IMEX (800-4639) or by sending a request by e-mail [email protected]
