The city of Dubai's real estate market has experienced significant growth over the past year, and experts are predicting the growth spurt will continue in 2014. This real estate boom is part of a balanced and cyclical economic force that is influencing a number of markets, including the real estate markets in this thriving city. As a result, it has had a positive economic impact on the U.A.E. as a whole.
It was six years ago that the economy was highly driven by construction activity. As the construction activity slowed down over the course of the next several years, it gave the supply overhang problem time to correct itself, and the emirate experienced an economic revival.
The Cause of the Boom
Lower construction growth means that demand is allowed to catch up with supply, increasing the value of the real estate. When low prices are directly associated with low value — in this case, created by an excessive surplus — it does not always spur buyers in the market. It is difficult to convince savvy real estate buyers to buy properties that are decreasing in value.
Reduced leverage is also a factor. As the construction and real estate sectors began to stabilize in comparison to the unstable growth and momentum experienced in 2008, it made the market less vulnerable to exogenous economic forces. This helps to reduce the risk of a sudden stop in the construction of new properties. Basically, a healthy economy helps to support itself and the sub-markets that exist within it.
New Construction Drive
Over the course of the past 18 months a number of new major projects have been announced by construction companies. Many of these projects are old projects that have been revived after being put on hold during the slump of 2009. This new stimulated growth supports projections of 25,000 residential units annually. There is also evidence that retail and hospitality markets will also experience significant growth. This growth in construction is better supported by the increased demand.
Boom to Continue
With a jump of more than 50 percent over the past year, top government officials are anticipating a continued growth rate that is comparative to that of last year. It is expected that the property buying growth rate should increase by as much as 52 percent.
There are some significant benefits associated with the purchase of residential properties in Dubai. The environment in Dubai is considered ideal by most. The fact that many consider the emirate to be a safe haven provides impetus for many real estate investors to make major investments with the belief that this current trend will continue.
Another area that growth is expected to continue is in transaction value. Experts are expecting an increase of 53 percent in the average transaction value. This is in comparison to the Dh236 billion that their industry experienced on last year.
With all things being considered, this is an ideal time for those looking to make solid investments in a real estate market that is still on the upswing to get involved. This real estate boom literally changed the economic landscape in the U.A.E. As the International Monetary Fund weighed the growth of the real estate market in Dubai, it readjusted its projection of overall growth for the U.A.E. from 3.9 percent to 4.4 percent. Real estate prices in Dubai have risen more than 33 percent in the first quarter of the year, and the growth is expected to continue.