Clive Frost is determined to wait to fulfil his dream of buying a home on Palm Jumeirah, even though villa and apartment prices there have fallen by almost half of what they were a year ago. Mr Frost, who has lived in Dubai for 20 years after moving from the UK, is still waiting for property on the reclaimed island to reach a "realistic" level. "I was going to buy there a couple of months ago, but felt the prices were being talked up," he says. "I would buy on Palm Jumeirah tomorrow if the prices were more realistic."
But other prospective buyers into the emirate's property market see a window of opportunity closing. "I don't think we'll get these prices at any other time," says Graham Dixon, who has lived in Dubai for six years. "I've made up my mind to buy and will try and negotiate as much as possible." Whether buyers are prepared to wait or not, their desire for Dubai property is helping prices in certain areas creep up from what property agents call their "lowest point", in March.
A four-bedroom garden villa on Palm Jumeirah is now listed at between Dh7.5 million (US$2m) and Dh8m, compared with Dh6.5m in March, while a basic apartment in the Shoreline Apartments carries a price tag of Dh1.9m, compared with Dh1.7m in March. Similar increases have been seen in popular communities such as The Springs and The Meadows. But the price movement does not necessarily reflect a rise in sales activity. In fact, property sales in Dubai fell in the first half of this year by more than 40 per cent compared with the same period last year, according to REIDIN.com, which tracks property with data from the Dubai Land Department.
There were 1,724 sales in the first half of the year, a 42.6 per cent drop from the same six months last year. "I think what happened was that we got to a stabilised point," says Raymond Kuceli, the chief executive of the property agent Madania Real Estate. "Buyers created some confidence and sellers thought that was the point they could get a bit more, simply because that's what they were used to. The Dubai market has always been rise, rise, rise.
"Because there were a few active buyers when offers were made that were very close to where the prices were listed, the owner would put the price up," Mr Kuceli says. After a period of about six months when business ground to a halt, Mr Kuceli says last month was busy for his agency. As interest from buyers picked up, so did prices. Deutsche Bank reported an average price rise of about 6.5 per cent to Dh1,285 per square foot in 13 major locations in Dubai last month, compared with May. But many bankers and analysts are wary of saying the market has levelled out, and some are predicting further declines.
Buyers are slowly regaining their confidence, agents claim, and with bank lending still limited they are mostly coming with cash in hand. They are after completed properties in quality developments and good locations. Put simply, they are searching for properties that they once could not afford. Abdul Rehman Ali is one such buyer, but he is also a knowledgable investor. Mr Ali does not call himself a speculator but he is part of a group on the lookout for what he calls "distressed properties" - homes they can buy cheaply to rent or sell when prices recover.
He is not deterred by falling rents but is closely watching developments where people want to live, such as The Springs, The Meadows, Jumeirah Beach Residences and Palm Jumeirah. "We know, because of the recession, prices have fallen and demand has fallen, but at the same time we have an opportunity to buy properties at a lower rate," says Mr Ali. "If we keep them for a year or so, we will get more by the time it comes to sell.
"During that time you can rent the property out. In the boom, values appreciated between 25 per cent and 40 per cent a year but now, even if you get just 5 per cent and rental yield is 10 per cent, you still make 15 per cent. "I'm still confident in Dubai. There are a lot of multinational companies who still want to move here." With the expatriate population in Dubai expected to fall by 8 per cent this year, according to the Swiss bank UBS, and an estimated 30,000 new units due to come on line between now and the end of next year, the market is counting on people like Mr Ali to lead a recovery.
Agents also expect more investors to come forward after Ramadan. "Certain communities have started climbing a bit but I don't see any big improvement until after Ramadan," says Thomas Bunker, an investment sales consultant at Better Homes. "Historically, many Arabs, especially in Saudi Arabia, get a lot of their money from businesses and governments around that time," Mr Bunker says. "When they get that inflow of cash they like to invest it, and traditionally they like to do so in Dubai property.
"For the last eight months to a year, people have been watching the prices drop and are waiting for them to bottom out before they get back into the market." While Mr Bunker expects the extra activity to increase prices, the rises will not be felt across the board. "There are a lot of projects by lesser developers that are lower in quality, and where the location and quality are not as good," he says. "I think these projects will suffer for a while. A lot of the attention is going to be on quality buildings that are now affordable for people, compared to this time last year."
Until then, the "cooling off" period will see sellers' and buyers' expectations drawing closer together, Mr Bunker says. "Buyers paid through the nose before, so when the market turned they took advantage of it," he says. "We've spent a lot of time trying to find properties for these people, who have been as aggressive as they could to drive the prices down, and they've succeeded. "But now it seems we're sort of in a half-half situation, where neither seller nor buyer has the power."