Mar 28, 2011 – Dubai (UAE) – Dubai real estate prices have fallen further in Q1 2011. Price drops have varied across different areas. Areas seeing the highest falls are where new supply is the greatest. Other affected areas are those that offer low quality and have nearby areas where quality alternatives have appeared.
Dubai apartments for sale have fallen in price more than villas due to the large amount of new apartment buildings being built around Dubai. So is this a good time to buy a property in Dubai? The fundamentals of Dubai in terms of the economy looks positive. Dubai has emerged well from the recession and is seeing steady if unspectacular growth in terms of GDP
However, a closer look reveals a more positive picture. Prior to the recession, real estate in Dubai accounted for 26% of Dubai’s GPD. This sector has shrunk enormously. Yet, despite this drop in GDP from the real estate sector, the other sectors have performed strongly to make up for this and post a positive GDP growth. Dubai is growing as a business and tourist hub – its key long term objectives. The health of the economy has a greater impact on Dubai properties than in other typical markets. This is because the vast majority of residents are afforded a visa to stay in Dubai if they hold a job. A better economy creates more jobs and increases the population of Dubai. A higher population thus increases the demand for properties in Dubai.
While the expected supply has a negative pressure on Dubai property prices the increasingly well performing economy and expanding population will absorb the supply. In the long term, now or the coming months, this is a good time to buy Dubai properties. The mortgage market is showing signs of recovery which will increase the buying power in the market
The continued population growth will also increase demand for rent and Dubai property for sale. For those looking at Dubai investment properties this year, the questions are around which areas are best for rental returns and long term capital growth. Dubai Marina has always been and will continue to be a popular area. A typical Dubai Marina property will return around 8-9% per annum. A villa in Dubai will typically offer rental returns of around 6-7% per annum and there are some Dubai villas for sale that may offer greater returns.
However, an investment towards commercial property Dubai poses quite another proposition. Off-plan or unoccupied commercial units are a more of risky investment as many landlords will be competing for tenants due to the much larger over supply in the commercial sector.
Dubai real estate in the residential sector offers attractive prices at the moment with good rental returns. While the prices may fall slightly further in this year, from a longer term perspective, they are relatively cheap at the moment and represent a good opportunity to buy. A high rental return currently on offer for properties should more than satisfy investors.