Real estate transactions in the UAE are up by 18 percent so far this year, bucking the trends seen during 2015, according to property agent Allsopp & Allsopp.
While reports from developers and analysts indicate Dubai’s real estate market has seen prices drop over the past 18 months with the trend likely to continue in 2016, the agency said in a new report that transactions are up and the state of the market is in line with expectations.
Figures released by Allsopp & Allsopp also showed month-on-month growth in transactions over the last 12 months has increased by 12 percent.
These figures support data released by Dubai Land Department last week showing more than AED68 billion of deals was struck in the first 53 days of 2016, while the department predicts a total AED300 billion ($81.6 billion) of transactions over the course of the year.
Allsopp & Allsopp’s CEO, Lewis Allsopp, said: “There are two distinct property markets in Dubai – the investment market and the end-user market. While the investment market is constantly analysed and discussed in media, and yes prices are down, it’s a fact transactions are up, especially in the end-user market.
“What we’re seeing here is the evolution of a mature property market, where people are buying homes to live in after renting for a few years, then going on to sell those homes and upgrade to larger properties, creating a mature property cycle. It’s a fact people are buying homes.”
He said that while oil prices have a macro effect on markets and play a major role in the dynamics of the region, he questioned the effect this has on the retail property market.
“It’s important when talking publicly about the property market we segregate the markets into investment and off plan sectors versus end users and ready properties. Oil plays a bigger factor in the investment market, as like oil, gold and many other investments, property, especially an off plan purchase, is generally motivated by turning a profit. Based on the conversations and speculation we’re currently seeing in the market it’s no surprise investors are holding back to see how markets react,” he added.
Allsopp said the real estate market declined last year due to regulations and measures put in place by the Dubai government after 2008 to prevent another bubble and major correction.
Loan to value rates were decreased to 65 percent for purchases over AED5 million, meaning buyers need to have over a third of the property’s value in cash to buy a property. Off plan buyers are also asked to pay an additional registration fee of 4 percent of the contract value at the time of booking and increased transfer fees of 4 percent, up from 2 per cent previously when buying from a developer.
“These measures were put in place for a reason and they are doing the job they’re supposed to do, which is to stabilise the market and prevent another bubble. What we’re seeing now with the decrease in sale prices is the result of a regulated market acting as it should. The fact we’re seeing an increase in sale transactions is further proof of this,” Allsopp said.