Dubai is definitely a popular market for international investment, whether it’s in property, shares, or other assets. This is because it’s a market known for its pronounced boom and bust cycles. The very rapid growth of the boom periods serves to attract investors, but the bust stages of the cycle naturally see a slowdown in activity.
Recently, Dubai has been in the grip of a correction. This has been a far, far less pronounced correction than previous years have seen, partly thanks to the government’s introduction of a robust set of safeguards to prevent a repeat of past catastrophes. Indeed, with prices falling faster than relatively stable rents, some property investors have continued to be charmed by the resulting increase in net yields and bought into the market anyway.
For the most part, though, Dubai’s correction has naturally seen a slowdown in investment. But when it is booming, Dubai remains a prime, high-yielding investment market and even some fairly disastrous crashes of the past have failed to dent the popularity that the market enjoys when the going is good. This means that many investors have not so much turned away from the market during the slowdown as simply decided to watch from the sidelines until things turn around.
According to a recent report from Knight Frank, residential property prices in Dubai – which could also be taken to at least some extent as an indicator of the economy as a whole – fell by a total of 9% in the twelve months to April but are showing signs of stabilising. Higher-end properties, often favoured by investors, delivered a performance ahead of the wider market with prices falling only 5% in that time.
Some of the key investment property types may have already more-or-less stabilised, with neither prime apartments nor villas showing significant changes over the twelve month period. Of these two property classes, the strongest-performing at present are prime apartments, which even managed a period of quarterly growth. Prime apartment values grew by 2% between the last quarter of 2015 and the first quarter of 2016.
Knight Frank’s report predicts that Dubai’s property market will have fully stabilised by the end of this year, and will begin edging modestly upwards in 2017. Several factors, the report says, have helped with this relative stability and will likely continue to aid the next recovery. Most notably, these include the approach of Expo 2020 and the high levels of infrastructure and development investment from the Dubai government in preparation. However, there are also factors which currently remain uncertain and are likely to have a significant impact on any recovery, notably oil prices, the international ramifications of Brexit, and the approaching US presidential election.