Posted by: Helena Kryukova Endurance and cautious optimism - this is how you can describe the behavior of Dubai's developers and brokers in the first months of 2015, against the backdrop of rising demand and a simultaneous decrease in prices. It seems that the main lesson that Dubai learned from the difficult experience of 2008-2009 was the awareness of the importance of solid foundations for any enthusiasm. But the emirate’s enthusiasm in the real estate market did not decrease at all.
Change of stages
A natural change in periods of activity and relative cooling is characteristic of any real estate market. And Dubai in this sense, we can say, was lucky. After a feverish pace of growth and rising prices in late 2013 - early 2014, which so reminded many of the pre-crisis boom of 2008 that the IMF even issued an official warning to the Dubai authorities, the change of course towards cooling was relatively painless.
The critical stage has already been completed. The market collapse did not happen, on the contrary, in the second half of 2014, the market began to gradually and slowly acquire all the features of a mature and stable development. This was largely due to the timely and effective measures of the Dubai government, which has been repeatedly mentioned in many sources. Now I would like to say something else. About what this very market expects next.
The artificial revaluation of Dubai real estate, coupled with the saturation of the market with new high-quality housing, according to experts, will lead the emirate to the inevitable price adjustment in 2015. At the very beginning of the year, some alarmed analysts slightly overestimated the specific forecast figures in this regard, but after a few weeks they corrected their predictions. Thus, experts at Jones Lang Lasalle, an international analytical and consulting bureau, promise Dubai a 5-10% reduction in prices for 2015. According to JLL experts, only in the last two years, according to June 2014, property prices in Dubai rose by 56%. In 2015, according to JLL, 25 thousand units of new housing will be commissioned in Dubai, which is equivalent to 7% of the entire emirate's existing housing stock. However, according to Craig Plumb, head of analytics at the Middle East branch of JLL, the market is quite capable of accepting such a number of new real estate properties without lowering prices. Their decline, therefore, will be determined more likely by other factors, in particular, excessively high housing prices.
Another aspect of pricing in many sectors of Dubai’s economy that arouses concern of potential investors abroad is the situation with oil prices, the cost of which is traditionally associated in the public mind with prices for everything else, and especially in the Arab countries leading export of this " black gold. "
In this sense, experts are in a hurry to console us: a drop in oil prices will not have a significant impact on the housing market in Dubai. This emirate has little to do with the oil trading market, but a drop in stock quotes by 30% from the peak indicator in June 2014 may weaken the confidence of potential investors, experts say JLL. The situation in the foreign exchange market may weaken the activity of some investors somewhat: due to the peg of the dirham to the dollar, living in Dubai has become more expensive for some expatriates, but in general in this sense the picture will change little, the JLL report says.
Market degree
The fact that the clear cooling of the Dubai real estate market is a sure sign of its stabilization, one would doubt if only analysts expressed optimism in this sense.
However, it is completely shared by those on whom the further development of the situation directly depends, that is, the market participants themselves, developers and brokers, key industry figures. 90% of Dubai's real estate market is currently controlled by four industry giants - Nakheel, Damac, Dubai Properties and Emaar. Therefore, fluctuations in profit and activity of these developers significantly affect the situation on the real estate market as a whole.
For example, Dubai’s real estate market giant Nakheel, which commissioned 132 new residential properties on the man-made island of The Palm Jumeirah and a number of properties in Dubai’s areas such as A1 Furjan, International City, Jumeirah Village, Jumeirah Park and Jumeirah in 2014 Heights, expects significant profit growth in 2015 and is not going to belittle the pace of its activity. The company intends to increase its rental income up to US $ 2 billion per year, due to almost a million new square meters of retail space that the developer will commission in the current year, as well as 30 thousand new housing facilities that will be leased . Nakheel secured the support of banks for the next four years - financial institutions will provide the developer with loans of at least US $ 2.15 billion. Nakheel itself intends to provide construction contracts in 2015 for a total of US $ 1.91 billion, whereas in last year, this figure was US $ 1.44 billion.
Another major player in the Dubai real estate industry, Damac, also presented its forecast for the future: in 2015, the market is likely to stabilize, while in 2016-2017 it is likely that the number of new projects commissioned will decrease, which may lead to a new round price increases.
The collective opinion of most of the participants in the Dubai real estate market also confirms the moderation of the fall in housing prices in Dubai in 2015, but he calls others the factors of the fall. This is, first of all, an increase in fees for the sale of real estate, stricter rules for issuing mortgages and a lack of affordable housing, despite the fact that among all the Gulf countries (GCC), the UAE has regularly led the ratings in terms of the volume of real estate put into operation in recent years. . For example, the total value of real estate built in 2014 is estimated at US $ 21.28 billion. But, unfortunately, the share of the most sought-after, affordable real estate in this total mass is too small, hence the excessive demand for it.
Timeshare and crowdfunding
And these two new words were said by real estate investors themselves, who are constantly looking for new and most profitable ways to invest in the most reliable sphere, the sphere of residential real estate. For Dubai in particular, and the UAE as a whole, these two concepts have become particularly relevant precisely due to the constant increase in prices, which does not allow investors with a limited budget to purchase separate housing for year-round use. And here timeshare and crowdfunding come to the rescue.
However, these concepts are new precisely for Dubai, where this year for the first time a full-fledged proposal for co-financing housing purchases appeared on the market. Such an offer was made to small investors by DURISE regarding apartments in the Old Town Island complex in the central quarter of Dubai Souq A1 Bahar. According to a proposal from DURISE, the minimum amount of investment that interest holders can invest in a joint purchase of housing on the basis of crowdfunding will be US $ 5000.
The crowdfunding concept is aimed at those potential investors who do not have sufficient funds for independent purchase of individual housing, but who can invest part of the money needed to purchase a particular property. Thus, the intermediary company manages to raise enough funds to buy out one (apartment) or several (up to the whole complex) real estate objects, and equity holders-investors become full owners of this real estate on equal terms.
In general, crowdfunding schemes are quite diverse and involve various forms of investor participation. This principle of investing in real estate has recently been of great interest to investors in Russia and other countries of the world. In Dubai, crowdfunding in relation to real estate only "probes the soil." Another type of investment in real estate, which appeared in Dubai relatively recently and therefore not known to everyone, was the concept of timeshare. According to a new analytical report from the marketing company AFH, the Dubai real estate market will gain at least US $ 3.8 billion in revenue in the near term due to increased demand for real estate in the timeshare sector.
The timeshare assumes that the landlord has the right to live in his apartment or house for a certain period of time during the year (usually a period from a month to three during the year of the owner’s choice), and the rest of the time the property is rented out by a management organization to which the owner entrusts this right or the one that originally built and operates this residential complex. Thus, housing brings income to the homeowner, and, at the same time, replenishes the fund of hotel real estate in the city. This form of ownership is also often referred to as shared or joint ownership. The timeshare industry in the UAE grew by 15-20% only in 2013, and in 2014 - by another 30%, according to the AFH report. But the demand for such hospitality facilities is growing year by year, both from tourists who want to stay in comfortable apartments, and from investors who want to buy a second home for themselves, which at the same time could be profitably rented out most of the year.
Thus, it is obvious that Dubai has proved its ability to learn from mistakes: now rising real estate prices here do not cause market collapses, but only give rise to new ways to manage both the market and investments, which is reflected in the introduction of relatively new crowdfunding and timeshare schemes for Dubai. And whatever the causes of fluctuations in the real estate market in Dubai, one thing is obvious: they all have a real basis, which means that price changes can be considered not a sign of market degradation, but rather a sign of its final maturity, which comes only in a period of complete stability .
You can obtain additional information on the acquisition and management of real estate in Dubai from IMEXReal Estate specialists by phone, in Moscow +7 495 5100008, toll-free phone in the UAE 800-IMEX (800-4639) or by sending a request by e-mail [email protected] .
