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Flipping heck: Dubai real estate not speculation driven
Report confirms growth after ‘property flipper’ crackdown
September 4, 2013 5:37 by Muhammad Aldalou
A report released today by Standard Chartered Bank states that, while residential property prices in Dubai have been soaring over the past 12 months (38 per cent for apartments and 24 per cent for villas), the market is primarily driven by strong demand and improved economic fundamentals, rather than excess speculation.
Dubai’s property market was hit hard after the global financial crisis, with prices plummeting around 60 per cent in 2009 and 2010. In contrast to what the market went through in 2008, the key difference between the real estate market then and now is off-plan sales.
“The ‘flipping’ of off-plan properties was the main reason behind the previous boom-and-bust cycle. Authorities are deploying efforts to ensure that off-plan sales are controlled,” states the report.
In the next two years, the emirate is expected to draft seven new laws to regulate the market, maintain property values and curb ‘property flippers’, thereby avoiding another boom-and-bust cycle.
Improving demographics, economic growth, return of investor confidence, improving regulations and Expo 2020, were listed as the primary factors fuelling the fast recovery, adding that the price rise has been steady rather than sudden.
“The sharp increases in property prices in 2008 were driven by excessive short-term speculative activity, especially on off-plan properties. For these properties, buyers only had to put down 10 per cent deposits (rather than the full price), so the market became highly leveraged,” continues the report.
Steve Morgan, head of Cluttons Middle East, says: “The acceleration in residential capital values this year has been underpinned by robust levels of job creation and a rising population, rather than being fuelled by ‘fly-buy’ dealers, as was the case in the past.”