Question: I am new to the Gulf region and am thinking about buying a property in Dubai. Real estate agents are very positive about the market’s future. However, I’ve noticed that many new properties are being built, which makes me cautious.
After talking to friends, I feel I need to be careful about the market possibly being too expensive. What do you think about the property market in Dubai and the UAE in general? Is the market as strong as agents say, or should I be cautious?
Also, since Dubai seems crowded and possibly expensive, what areas in the UAE would you recommend for new investments? Are places like Sharjah or others worth considering?
— MJ, Dubai
Answer: It’s easy to be influenced by others’ opinions, but you should look at the facts before making your own decisions.
For some time now, the Dubai property market has been on a strong positive trend that doesn’t seem to be slowing down soon. It’s becoming a dream for investors to try to predict the market, but no one can do it perfectly.
Logically, what goes up must come down, but when I mentioned looking at the facts, I was mainly talking about population growth.
For some time, the number of people moving into Dubai has been higher than those leaving. This means the population is growing faster than the number of new homes being built. More people are coming to live in Dubai than the number of properties being finished.
Add to this other positive factors like the 10-year golden visa, investor visas, ease of doing business, supportive local and federal governments, no income taxes, low corporate taxes, low VAT, safety, a strong economy, and good weather.
These reasons explain why the population is growing. I wouldn’t say the property market will keep rising forever because eventually, house prices will stabilize. But as long as more people are moving in than the number of new properties being built, the current trend will continue for a while.
I predict that for at least the next two years, this trend will keep going before anything changes. If the population continues to grow even more, this real estate boom could last beyond 2027.
Other emirates are also developing their own real estate projects. Umm Al Quwain has Al Siniya Islands, Ajman has Al Zorah, Sharjah has Arada, and Ras Al Khaimah has Al Marjan and Al Hayat Islands.
Question: One of my real estate friends told me that Dubai property is a bubble because the city is creating too many new properties. As the need for housing increases, more properties are built as long as there is land available.
But if you keep building more and more, eventually there will be more apartments than people to live in them, or people might not be able to afford them, causing prices to drop.
The city will then depend on new development projects to attract more tenants. Consider the type of people moving to the country and their income levels.
It’s ironic coming from a real estate agent, but his reason is that he’s only there to earn commissions. Is this a bubble?
— GT, Dubai
Answer: Everyone is talking about a bubble. They need to understand that when economists talk about a bubble, it’s because of many factors.
I have experienced two real estate downturns in Dubai. The first was the global financial crisis in 2008/09 that affected everyone, and the second was the real estate downturn in mid-2014, which lasted at least six years. What is different now compared to then are the fundamentals. The reasons for the current boom are supply and demand, with more people wanting to make Dubai and the UAE their home.
As long as more people are moving to Dubai than the number of new properties being built, this strong real estate market is likely to last for at least two more years.
What goes up must come down, and this might happen in a few years. But if it does, it won’t be a bubble bursting; it will be a period of stability where prices stay the same. However, if the population continues to grow even more than it is now, this real estate boom could last much longer than just a couple of years.
Regarding your friend’s comment about agents being there for commissions, it’s unfortunate. Some people think this way, which can harm the real estate sector with poor work, bad advice, and terrible service. I would advise anyone looking to invest to do their own research and work with professional agents.
