Property prices in the glass and steel desert city of Dubai are set to bounce back after years of decline.
The United Arab Emirates city was badly hit by the global downturn as developers and investors were trapped in an off-plan housing bubble that dramatically burst leaving an oversupply of property and many speculators going bust.
Since then, the government has put the brake on the market by introducing a series of regulations to take the heat away from rising prices.
For the first time in two years, the ValuStrat Price Index has stood still – a signal that estate agents interpret as the residential property market bottoming out.
Instead of falling, the price of villas and apartments has stood still for seven months, with a tiny 0.3% decrease in average values.
“The market is showing some stability and buyers are looking to get back into buying homes because they are confident that prices are going to start to go up and in the long term, buying is cheaper than renting,” said the Q1 2016 ValuStrat report.
Prices fell more than 10% in a year
Average apartment prices were £2,670 a square metre, while villas fetched £2,755 a square metre.
The city suburbs seeing the largest rises were Motor City (up 1.5%), Dubai Production City and The Greens, which both saw a moderate rise of 0.7%.
Apartments in International City lost 1% of value, while the rest of Dubai’s neighbourhoods were unchanged.
ValuStrat expects more than 33,000 new homes to change hands in 2016.
A lot of new homes are delayed completions on projects due to have gone on the market last year. They were held up due to lack of demand from buyers.
Despite the hope of home prices bouncing back, the year-on-year performance saw home values fall by 10.4%, while they dropped 2.5% in Q1 2016 compared to the last three months of 2015.
Quarter on quarter, the average apartment fell 7% in value, while the average villa lost 12%.
Rents expected to keep falling
Home rents also slumped in the year ending March 2016 by 6.8% – while the average rent was 10.8% less than two years ago. Tenants are paying 6% less this year for apartments and 11% less for villas.
“We expect house prices to rise as demand from home buyers finally balances out with supply from developers,” said a ValuStrat spokesman.
“Rents should also soften into next year as more apartments and villas become available.
“A lot of projects will come to the market late due to over-optimistic completion dates and poor management.”
The spokesman also argued that home owners should not spend too much money on refurbishing their properties if they plan to sell.
“Overspending could lead to the risk of the seller losing money,” said the spokesman. “Any expensive upgrades should be researched to see how they affect the hone price before any unnecessary spending takes place.”
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