A large majority of business executives believe a drastic property market correction in Dubai is unlikely, according to a marketplace intelligence survey by London Business School.
The survey, conducted with more than 200 business executives to analyze Dubai’s booming residential property market and the possibility of another real estate ‘bubble’, revealed that 84% of respondents don’t believe Dubai property prices will plunge in the same way they did in the 2008-9 market correction, bi-me reported.
Joao Cocco, Professor of Finance, London Business School, says: “The vast majority of executives surveyed do not believe that there will be a drastic decline in residential real estate prices in Dubai over the next 12 months. Only 3% of those surveyed expect an annual decline larger than 20%.”
Despite speculation from real estate analysts across the UAE and the wider region about soaring property prices and the risk of another speculative property bubble, almost half (47%) of respondents would invest in the Dubai property market.
More than a third cited a strong economic outlook for Dubai as their main reason for investing. Other reasons included high rental yields for Dubai properties and personal reasons, including the high quality of life in the UAE and preferring to purchase instead of renting.
Greater Restrictions
More than a third (44%) of the respondents, who included alumni, current executive MBAs and past participants of the School’s Executive Education programs, said greater restrictions on real estate supply would most effectively limit market speculation and prevent a future real estate bubble. Tighter eligibility for home finance loans would also help said 18% of those surveyed.
“Roughly half of the executives surveyed recognize the risk that the supply of new properties will increase at a faster rate than the demand, leading to a situation of over-supply and a decline in real estate prices, and favor greater restrictions on construction as a way to mitigate this risk,” said Professor Cocco.
Business executives were divided on the question of whether property prices would move upward or downward, with just over 50% saying they will decrease, and 49.75% saying prices will remain stable or increase.
More than two thirds (68%) of respondents predicted that Dubai’s residential market will not continue to grow at the same rate as it has thus far. Just over half (51.5%) of the respondents thought that any losses or gains in the Dubai property market will be within 10% of their current value, with 31% stating the market will decrease by less than 10% and 20.5% predicting an increase of less than 10%.
Professor Cocco added: “It is reassuring to see that more than two thirds of respondents do not believe that property prices will keep on increasing at the same rate in the future. Unrealistically high expectations of future house price growth have in the past been a source of booms in the housing market, only to turn into bust when expectations change.”
Respondents also felt the commercial property market would remain relatively stable, with almost 64% of respondents saying any increases or decreases in prices would be less than 10%.
