Dubai property prices are cooling to “healthy” levels after a two-year rally during which real estate rebounded from a slump when the global financial crisis hit in 2009.
Developers at a property show have rolled out scale models of latest projects, including Mall of the World, a larger-than-life venture announced in July complete with temperature-controlled high streets, a theme park, hotels and a theatre.
Also on display at the Cityscape show on Sunday were models of mansions for sale at a price of more than $25 million apiece.
Dubai property prices have been on a roller coaster over the past 10 years.
The market began expanding when it was opened to foreigners in 2002 and peaked at record highs in 2008, driven mainly by speculative investments.
Prices took a nosedive in 2009 as finances dried up in the global financial crisis, shedding half the value of the sector.
But a revival in demand propped up values and rents at breakneck speed, stirring fears of another bubble.
Data shows that sale prices surged by 56 percent and rents by 41 percent since August 2012, according to Dana Salbak, senior research analyst at Jones Lang LaSalle (JLL).
“We realise that this was very unsustainable,” she said on the sidelines of the annual property show, pointing out a “welcome levelling off” in sale prices and rents in the residential sector in the third quarter of 2014.
“We see the residential market stabilising. This is a healthy and sustainable level. We welcome prices and rents as they are,” she added.
A JLL report put growth in sale prices and rents in the third quarter at just two percent and one percent, respectively.
Knight Frank real estate consultancy also noted that prices and rents have cooled down.
“The growth rate has been weakening,” after having entered positive territory in mid-2011, the agency said in an autumn report.
It said a government decision to double transfer fees and a central bank cap on mortgage funding, introduced in the last quarter of 2013, were behind the slowdown.
“The government has played a major role in curbing speculation,” said Salbak.
– Developers learn lesson –
In the pre-crisis period, Dubai developers built grandiose projects, turning swathes of the emirate’s desert into urban neighbourhoods and business centres.
A combination of investor appetite and available finance led at the time to the launch of scores of projects at the same time, mostly sold off-plan.
It all came to a shreiking halt when investors vanished along with a drying international finance triggered by the crisis. Many projects were cancelled or put on hold.
Developers have learnt a lesson, despite the larger-than-life projects on display at Cityscape, according to Salbak.
“They are phasing out their projects in a longer timeframe and they are trying to secure more resources for funding, instead of relying on off-plan sales,” she said.
Mohammed al-Habbai, head of urban planning and infrastructure at Dubai Properties Group, which built several landmark projects, spoke of a change in attitude on the part of developers.
“The market is driven by the end user. Whatever we build, we build it for the end user,” he said, hailing a “more mature” governance of the sector.
“There is a huge demand for the real estate market,” he said, adding that interest in property is coming from “all over the world.”
Indians top the list of foreign investors, pumping 10.2 billion dirhams ($2.8 billion) into the sector in the first half of 2014, according to Knight Frank.
They came second only to UAE nationals who purchased property worth 12.6 billion dirhams during the same period.
British and Pakistani investors spent 5.8 billion dirhams and 4.5 billion dirhams, respectively, while Saudis bought property worth 3.4 billion dirhams.