Market sentiment towards the purchase of residential property in Dubai has softened compared with 2016 due to higher buyer and macro-economic uncertainty particularly for first-time investors, according to the property consultancy Core Savills' latest annual survey.
Only 34 per cent of respondents to the survey said Dubai’s property market has exhibited signs of recovery, compared with 50 per cent in last year’s survey.
Eight out of 10 respondents who do not believe in the sector’s recovery expect the market to be oversupplied by 2020.
Dubai's property market has suffered from an economic slowdown and, until recently, the appreciation of the US dollar, to which the dirham is linked, making it expensive for some investors to buy real estate in the emirate.
Core Savills said there is a discrepancy between sentiment and reality, given that there is a 40 to 50 per cent lag in the past five to six years between the number of announced and delivered units. About 15,000 to 18,000 units are delivered on average every year, boosting existing stock by 3 per cent to 4 per cent.
The survey also showed 20 per cent of potential buyers below the Dh1 million market attribute their hesitancy to lack of market knowledge.
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“These factors accentuate the fear to take a ‘leap of faith’ for many first-time buyers in their decision to acquire a property in Dubai, despite the very convincing signs of maturity, stability and added depth to the market that have become apparent since 2011,” said David Godchaux, the chief executive of Core Savills. “This is further illustrated by the ratio of existing owners in the total number of potential buyers: about 36 per cent of those who are planning to acquire a unit over the next 12 months, already own a property in Dubai, and 50 per cent of existing owners are considering further potential acquisitions.”
With regards to off-plan sales, twice as many investors are interested in purchasing property than end-users, particularly in the apartment segment below the Dh2m mark, the survey showed.
As developers try to change this trend by offering attractive payment plans, 64 per cent of respondents said these plans encourage buyers to buy off-plan rather than existing properties.
The access to mortgage financing, though, remains the biggest deterrent to buyers of properties below the Dh1m price point
“This has a relatively strong impact on the bottom segment from an end-user point of view, because buyers are 30 per cent more likely to prefer mortgage as a finance mean for acquisitions below Dh1m [87 per cent of them would prefer a mortgage] than a purchase above Dh4m,” said Mr Godchaux.
