Real Estate Market Stimulus
Prices in Dubai’s residential property segment have posted a minor growth over the past few months, according to a number of research firms’ reports. Other areas of the real estate sector are also showing signs that recent declines are beginning to reverse. However, due to excess supply in many segments, it will be some time before demand catches up with new development.
In its first-quarter report, the international commercial real estate firm, CBRE said the real estate sector continues to grow. It has witnessed an increase in transactions for residential properties, from 2605 in the fourth quarter of 2011 to 2745 in the first quarter of this year, for a total value of $843.93m. Prices also increased by around 3% in few areas of the city.
While the rate of growth given by different agencies may vary to some degree, most point toward a slow but steady recovery in Dubai’s residential property market. According to CBRE, rates for commercial space have remained unchanged over the past five quarters and occupancy levels and demand have slowly been increasing, with many companies looking to relocate to updated and fitted spaces.
The increased interest in residential properties has apparently struck a chord with a number of the emirate’s banks. New mortgage products aimed specifically at foreign clients are under development, as international clients are increasingly viewing the Dubai real estate market with renewed optimism.
Easier access to credit for overseas buyers could serve to further stimulate sales, both among foreigners looking for investment properties and those wanting to live in the emirate.
Some of that investor confidence may be driven by a new law proposed by the government and put forward by the Dubai Land Department (DLD). Under the draft Investor Protection Law (IPL), which could be enacted this month, the rights of owners will be reinforced, including their ability to cancel their contracts if the developer does not provide all the facilities and services listed under the buyer’s agreement, or if property is not handed over within the designated eight-month period.
The law will also mandate that sales for a project cannot be opened until at least 20% of the development has been completed, reducing the likelihood of cancellation after deposits have been taken.
Though the proposed legislation will help protect investors buying into new developments, it will not be retroactive, leaving those who have invested in cancelled or delayed projects having to settle matters in the courts or through arbitration.
Despite the lack of a retroactivity clause, the new law will strengthen investors’ rights and will help instil further confidence in a sector that is already regaining momentum.
Investors are slowly returning to the real estate market, as an improved legal and regulatory framework transforms the outlook into quite favourable.