The changing UAE and Dubai Property Market

The media in the UAE and Dubai is full of articles about the property market. Will it fall, will it stabilise, or will it collapse? Is it only off-plan that is suffering or is it also the market in general?

With this report you make your own judgement and draw your own conclusions.

The basic rule of property price establishment

As most of you are regular user of UAE Lists, you know that what

 basically forms a property market price is demand vs. availability.

So if the availability is low, the price increases. If the availability is high, prices decrease. This is the truth in all capitalistic markets, from stock markets to the Gold Souq.

As we have been tracking the UAE and Dubai property market since Dec 2007, we know what has happened to availability here. We are tracking the listing from 10 of the largest property agents here, and we collect data almost every day.

What you can see if you are a registered user is the TRUE change in availability of property in the different areas of the UAE incl. Dubai, segregated into sub-areas like Dubai Marina, JBR or Arabian Ranches.

The property availability in the UAE and Dubai

So first – let’s see how availability has changed from we started collecting data in Dec 2007.

Data (C) UAE Lists 2008 – reproduction only with permission from UAE Lists.

As you can read from the graph, the availability is pretty stable from Dec 2007 until May 2008. Average properties for sale are about 5.000 unit’s total. But from June, the market sees more and more available property come onto the market.

UAE and Dubai August 2008 changes

In august when the Visa rules change, we see a big jump in the number of properties for sale. The new Visa rules seem to scare International investors and as far as we can see, some of them are quick to jump ship.

UAE and Dubai October 2008 changes

The next very large jump was “Red October” where the international stock markets enter a massive downfall. The downfall makes many overseas investors scared, and that make them put their property on the market – and in some instances they are forced to sell by their banks. Many of them have invested heavily in to the stock markets with high Gearing* (see explanation below) basically making them go from wealthy individuals to “close to broke”

But October was really a changing point for the UAE Market. We saw between 100 and 200 properties being added to the market every single working day.

Data (C) UAE Lists 2008 – reproduction only with permission from UAE Lists.

As you can read from the above graph, the Estate agents are very busy listing properties. And as we can see from our data collection, many properties are “thrown” into the databases, and then edited heavily the days after. Especially during weekends we see property descriptions appear where there was none during the week. That equates to a lot of pressure from clients just to get the property listed. Unfortunately it also means property pictures might be quite generic and not from the property for sale.

Killing the “It is only off-plan that is affected” argument

Data (C) UAE Lists 2008 – reproduction only with permission from UAE Lists

As you can see from above the higher availability is even in established or completed areas. JBR has increased in availability with 25% in 6 weeks- and that cannot be described as off-plan – that has been completed for 1 ½ year. Yes we know Arabian Ranches are not 100% complete, and there still are a few “off-plan” properties there. But actually the listings we see are about 60/40 split between “Ready to move in” and off-plan property being advertised the last 6 weeks.

So this growth in availability is NOT only in UAE off-plan property. It affects the whole market!

Remember the above numbers are only change in availability from 10/9 to 30/10 – so covering just about 6 weeks. If you are registered UAE Lists User, the complete table, with ALL areas in the UAE is available to you – free of charge! Go to www.uaelists.com and follow the instructions to download the data.

UAE and Dubai property availability conclusion

As you can read from our numbers, the availability has changed a lot. If we define the period from Dec-2007 until May-2008 as “average” in a great performing market - then the availability has increased with 150% from then until end of Oct. 2008. If the availability continues to increase at this pace availability will reach about 210% by the end of November.

If we compare that average vs. availability now to established markets, an increase in availability of 150% from peak property pricing, we have a big price correction coming, that will not only cover the off-plan but the whole property market. In the UK and US the prices have fallen anywhere from 20 to 80% dependent on the area.

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* Gearing an investment means “borrowing” extra money to fund your e.g. purchase of shares. You might have cash US$1m and borrow US$4m from a bank, with security in the shares and rest of your assets. If the shares go up, it is fine, but if shares go down as quick as they did in Sep. 2008, you might end up owing the bank money. You had US$5m invested and shares dropped 40%. That only leaves valuables on your account for US$3 ml. Now the bank gets nervous and forces you to sell all shares at the lower price. And since you borrowed US$4m from the bank, you actually owe the bank US$1ml, and your initial US$1m is lost too. Pretty scary, but that is actually what has happened to a lot of wealthy people.