Buy Now Before UAE Rents Go Up

The Arab spring and increased investor confidence have turned around the country’s plummeting housing market.

Mortgage rates at HSBC, the largest home lender in the UAE, start from 3.99 per cent. Even at the height of the UAE property boom in 2008 local mortgages never got below seven per cent, although some more sophisticated local buyers managed to borrow at lower rates in places like Singapore – not that this helped them much when house prices plummeted by more than half to levels not so far away from what we have four years later.

However, it is always an important signal in a real estate market when the cost of local borrowing falls. There is no denying that afford ability for new home buyers has never been better, particularly now that rental costs are beginning to rise again.

Many potential buyers are currently in rented accommodation. Tenants enjoyed a windfall crash in rents after the property crash of late 2008 but 10-15 per cent rental rises in the more popular areas are a wake-up call in 2012. Rising rents and falling mortgage costs is a powerful lever on any housing market!

I expect this to begin exercising a strong impact on the market this autumn, unless another global financial crisis frightens everybody off doing anything.

“Tenants enjoyed a windfall crash in rents after the property crash of late 2008 but 10-15 percent rental rises in the more popular areas are a wake-up call in 2012. Rising rents and falling mortgage costs is a powerful lever on any housing market.”

Another heartening signal for would-be residential property investors in the UAE is a big change in the supply side situation. At the start of 2012 ArabianMoney.net noted that the oversupply of UAE residential property had topped 100,000 units for rent or sale on the Dubizzle.com listings website for the first time.

There were 27,045 units for sale and 78,074 units for rent. We took the estate agent’s view and said: ‘It does not look as though this will be enough to keep the market stable this year… There is just so much property of almost every type looking for either a buyer or a tenant’.

Six months later and we found 47,658 units for rent and 29,491 units for sale. Spot the disappearing inventory: 105,119 units down to 77,149; so there are 27,940 less vacant homes in the UAE than at the start of the year. It is a huge figure for the UAE and that decline in oversupply represents around 10 per cent of the entire housing stock.

Now we make no claim that Dubizzle.com is the definitive listing. Not all property available is listed on this website and many adverts are duplicated, but it is probably a fairly reasonable yardstick for assessing the market.

In Dubai there were 38,007 homes for rent and 26,722 for sale in June compared with 53,321 units for rent six months ago and 23,318 for sale. OK that is slightly more inventory for sale but the rental uptake of 15,000 units is amazing.

What emerges then from this month’s survey of the UAE residential property scene is a picture of a market turning around very fast. A lot of this is to do with the influx of new residents due to the Arab Spring, combined with a genuine economic recovery thanks to high oil prices and better earnings from trade, tourism, retail and aviation, and we feel it only fair to add real estate.

Going forward we expect more of the same, only more of it. The Arab Spring is a disaster for business and wealthy people across the Middle East and North Africa. Countries have become politically unstable, and it is very dangerous in certain cities. Safeguarding your family is the primary duty of any self-respecting father anywhere in the world and sending women and children to safety is an obvious priority. Real estate in the UAE benefits as a safe haven.