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DUBAI PROPERTY PRICE INCREASE IS SQUEEZING 70% OUT

Thursday, 02 Oct 2008

The market for property in Dubai is becoming so expensive that eventually a lot of luxury properties will be impossible to sell because no one will be able to afford them. An inequality between supply and demand could exacerbate the correction in the Dubai property market, because most of the current demand is for cheaper properties, which are not the ones that are becoming available.

Shuaa Capital, a real estate analyst for Roy Cherry said, “Currently the supply is geared more towards the high end segment in an environment where prices have appreciated rapidly, so it’s like a double whammy. Seventy percent of Dubai’s population has been priced out and there are very few products that do target the low and mid income segment, which is effectively where the bulk of demand is. Not everyone in Dubai can afford a four million dirham property.”

There will continue to be opportunities in the city for developers who aim for the lower income group. Shuaa Capital has predicted that Dubai property prices will be corrected, starting in 2009 and carrying on until 2010 and possibly beyond. Cherry claims that the Dubai market is ‘more complicated’ than the one in Abu Dhabi, because of the disparity between supply and demand, plus the delay of projects that has made the problem worse.

Prices in Abu Dhabi are more foreseeable at the moment, since demand has increased and it is highly likely that it will surpass supply during the next 3 or 4 years, although the bad vibes currently being generated by the high price of property in Dubai might contaminate the Abu Dhabi market too. These two markets have been subject to a great deal of speculation buying in the last few years, and with the dearth of affordable accommodation in Dubai coming on the market, the affect of the foreseen price correction will be less severe in Abu Dhabi.