Over the years, Dubai has seen its fair share of sharp ups and downs in the real estate market. It’s almost certain that no investor, not even Dubai’s most infamous real estate tycoons, can accurately predict the rise and fall of the market. Though, even without this kind of knowledge, top investors still play the market and profit greatly from it, time and time again. So how do you time the market to buy property in Dubai, without a crystal ball?
For starters, you can establish the same set of rules that have worked for many who live by the motto, buy low and sell high.
The first step is to determine the type of real estate market that Dubai is in.
Types of Real Estate Markets
Real estate markets fall into three main categories:
A Buyer’s Market
Buyer’s markets exist when there is more supply, i.e. houses for sale, than demand, i.e. home buyers. Because every investor in this type of market has a surplus of properties to choose from, not every home on the market will sell. Most experts agree that if six months or more of supply is on the market, it is a buyer’s market.
A Seller’s Market
Conversely, in a seller’s market, there is measurably more demand than supply. Because there are fewer purchasing options for investors to choose from, the vast majority of homes will sell quickly. Typically, there is fewer than six months of supply in a seller’s market. In an extreme seller’s market, there is often less than two months of supply in the real estate market.
Neutral markets
Neutral markets have found their equilibrium, and this is where the market in Dubai tends to exist at most times. Note that there are good buys in neutral markets, although the indicators may not be as obvious. Typically, the supply and demand in the marketplace is balanced. The scales don’t tip in favor of either, meaning the market is stable without the volatile swings normally seen in a market trying to find its equilibrium. Inventory is, more or less, around four months.
Buy Property in Dubai – A Buyer’s Market
An investor looking to make a real estate purchase will sometimes choose to wait for the optimal conditions. According to most investors, there is no better time to buy than in a buyer’s market. Here are a few advantages to buying under buyer’s market conditions:
Lower sales price
Sellers in a buyer’s market who cannot wait for the market to turn in their favour will always be willing to sell. Sellers are more inclined to make a deal because they know that if they deny your purchase offer, they might not receive another for up to 6 months. When the market is over supplied and fewer homes are selling, prices will likely fall over that time period.
Buyers may seek concessions
Buyers can request that sellers pay concessions in the form of covering the cost of government fees, home warranties and special reports; such as pest inspections and roof certifications.
Request for repairs easily negotiated
If a home requires repairs or updates, sellers can, and often do, credit the buyer for the repairs, or fix any outstanding problems noted by a property inspector.
Buy Property in Dubai – A Seller’s Market
If an investor is not in a rush to make a real estate purchase, a seller’s market does not provide the optimum conditions for purchase. Here are a few disadvantages to real estate investment in a seller’s market:
Top price
Multiple offers are common. Sellers command above market prices, and get it.
No concessions
Sellers will avoid paying any of the buyer’s closing costs or for any inspections.
Request for repairs are not honored
Sellers often require that buyers purchase the property “as is.”
Buy Property in Dubai – A Neutral Market
Investors will always benefit from a property investment in Dubai. That being said, the opportunity for a higher return is slightly diminished in a neutral market.
Average market price
Homes in a neutral real estate market in Dubai will usually sell close to average market prices. It is still possible to make the most of off-plan properties and distress deals to purchase property under market rates.
Concessions
Concessions in a neutral market are up for negotiation. Success in these negotiations is dependent on the seller’s urgency so sell.
Request for repairs
Buyers may make a request for repairs and the seller will normally comply. A neutral market does not benefit nor harm any party. A level playing field allows for reason and best-practice to solve most issues.
Zola Group Real Estate Services are available to local and international clients looking to take advantage of the highly rewarding property market in Dubai and the UAE. You're invited to contact our property consultants via email or phone to learn more about our specific services or to inquire about current real estate opportunities. To view current property listings Click Here.