Dubai's real estate market has always been one of the cornerstones of this country's success. Whether you're talking about architectural feats such as the Burj Khalifa or the probability that you bought in at the right time; Dubai's real estate is recognised globally. Despite the period of turbulence in the last decade, the property market remains an important source of income for the government and one that will continue to generate successes for investors and homeowners alike.
The long-term vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, built upon a foundation laid by those before him, continues to lead the Emirate, as well as the rest of the country, towards a future that is bright for all who call the Emirates home. In line with the broader vision are continued efforts to attract talent, wealth and the prestige that put Dubai on the world's stage. An important achievement was winning the bid to host the World Expo in 2020. However, since winning the bid in late 2013, markets have been anything but stable. Undoubtedly beginning with the global economic crash in 2008, the property market has especially been subject to its peaks and troughs.
Like any capital market, the highs and lows are inevitable and are actually healthy for markets as they drive innovation and provoke changes to laws. Generally, the real estate sector has four key cycles. A peak is generally defined as the time when real estate is hot and people are in a rush to acquire; demand is high and thus prices increase. Banks generally tend to loosen lending restrictions during a peak so as to help fuel purchasing.
With the peaks come periods of contraction when the market is pulling back. Due to other economic factors and events, people want to liquidate assets and a period of selling begins. Generally, new construction largely ceases, unemployment increases, prices are slashed to sell quickly, properties take longer to sell and the market actually becomes more affordable and accessible.
In the third cycle, a trough is what we might otherwise call a bottoming out; essentially a "low" is reached and prices begin to stabilise. Lastly, we welcome the expansion that follows as that means housing prices rise, and thus value for those who own, construction surges, unemployment decreases, interest rates rise to stave off further borrowing, and overall, affordability decreases.
You will recognise how Dubai's property scene fits into certain parts of these cycles, albeit not entirely. For starters, construction has been constant, and actually increasing, even in periods we can define as contractions and troughs. The recent period is the only one that has seen a remarked decline in property prices, although inflation has run high for an extended period of time. These characteristics run antithesis to what is typical of the properly defined cycles in real estate.
While new construction and infrastructure spending is necessary in order to host the Expo in 2020, some other initiatives will have to follow so as to support the amount of new supply that will enter the market over the next couple of years.
What Dubai has witnessed for the past couple of years is certainly a contraction and prices have come down across many communities. While in theory, this should encourage purchases, especially from those who otherwise couldn't afford to, Dubai's real estate transactions in 2018 did not reach the levels they have in previous years. Although transactions by volume have declined, there have been other achievements such as the expansion of affordable housing, financial support from developers such as rent-to-own schemes and post-handover payment plans as well as leading numbers of projects coming to fruition faster.
In line with continued innovation are government initiatives that continue to generate interest and continuity within the property market. Toward the government's Dubai Plan 2021, technological integration between the public and private sectors has now become priority with initiatives such as the Dubai Land Department agreement to facilitate e-mortgages with Dubai Islamic Bank.
The days of what many called the 'Wild Wild West' are fading away as Dubai's property market matures. The Executive Council continues to provide positive measures that are expected to enhance, as well as provide a boost to the property market. While we eagerly await more details on those amendments, we can expect other changes that will allow more residents to become homeowners, which will inevitably enhance the entire ecosystem.
The writer is director of research and data, Property Finder. Views expressed are her own and do not reflect the newspaper's policy.