As supply finally increases in Dubai and the number of short-term rentals grows, the market will avoid a dramatic collapse. Dubai’s real estate market has gone through cycles in the past.
Investors are starting to show interest in recent property purchases, although most buyers are still end-users. Since the beginning of the Dubai property market upturn in October 2020, when the wealthy first moved to new and larger homes, this has been the constant. This sparked a massive spike in the price of all types of Dubai homes, old and new. It was almost sure to sell if it was a villa.
Increase in Investors
The focus is on selling to end-users whenever feasible, even as developers gain confidence in fresh off-plan releases. As new projects are launched, there has been an increase in investors, Aengaar remarked. End-users continue to outnumber investors despite a low number of new product launches.
We had a tremendous high in 2005, followed by a massive drop in 2008. In 2014, we were back at an all-time high, but the market crashed in 2018 after a quick recovery. Property values reached record highs in 2021, leading some to wonder when they will fall again.
Types of Investors in Dubai Market
Even if there is a slight decline, I don’t think we’ll see any severe downturns. In today’s world, the market has matured considerably. Even in a downturn, an investor may now develop a portfolio and make double-digit returns on their investment.
The following types of investors may now be found in Dubai’s property market:
- The old-fashioned flipper earned millions in the real estate bubble of 2004 and 2005 by purchasing pre-launched real estate and selling it for triple-digit profits within days or weeks. The property had already doubled or tripled in value by the time it reached the end consumer, which is the primary reason why the markets are always correct. Developers are now taking advantage of the initial few flips so that these investors will see fewer possibilities. Better projects are being constructed as a consequence of this.
- The end-user is a crucial component when it comes to any real estate market. There will always be a need for stability in Dubai because of the city’s ever-growing population.
- It has been the yield-seeking investors who have lost out in Dubai in recent months. It’s becoming harder to remove a low-paying renter because of rules that assist the tenant, resulting in a lower return for the investment. This investor isn’t interested in a 3-5 per cent return.
Collapses in the Dubai Real Estate
As a result, I believe that the days of significant collapses in the Dubai real estate market are behind us, thanks to the holiday rental sector. Over the next several years, I expect to see steady development and minor adjustments, if any at all.
Investing in short-term leases may provide 8–15% returns after fees and expenditures, making them attractive to investors wishing to build a portfolio and secure a steady stream of income. Other advantages include better upkeep and an easier time selling the property if the long-term renter moves out. Considerable funds and family offices are enticed to participate in this space by the high returns.
In comparison to other major cities worldwide, Dubai’s real estate is similarly undervalued. Investors might double their money in five years via short-term rental revenue and property appreciation as a result of this.
One-bedroom apartments on the Palm Jumeirah or JBR in a building with access to an exclusive beach may cost as much as $650,000. Alternatively, It would cost between $1.5 million and $2 million to rent the same quality condo in Los Angeles, Miami, New York or Barcelona.
It is expected that the combination of increased supply in Dubai and short-term rentals would lead to a slump in the market, followed by a resurgence in the market a few years later.
Over the next ten years, Dubai’s real estate market has a lot of room to develop since new projects are continually being announced. When inflation is taken into account, I am confident that in 10 years, when we have reached worldwide levels, you will not acquire the same one-bedroom for $680,000; the same apartment would be worth over $2 million.