Slow and steady route to progress better

111Although the furor over Dubai’s successful Expo 2020 bid has all but died down, people are beginning to feel the pinch of the changing times as sales and rental rates continue to rise in key Dubai locations.
Mohanad Alwadiya of Harbor Real Estate helps us understand and identify what is essential in this newfound cycle of growth.

IMF issued a second warning late in 2013 in the wake of increasing house prices

One of the benefits ‘If being one of the 188 members that make up he IMF is the ongoing economic surveillance, analysis and commentary on the – economic health of its member countries. This allows the IMF to serve member countries by alerting them as to any risks that may be on the horizon’and providing economic policy advice to how to manage or mitigate those risks in he interest of promoting long-term, sustainable economic growth and where applicable, reduce poverty.Given the history of the Dubai real estate market the run up to the GFC, and the dramatic, now infamous decline in asset values that occurred during the crisis,it is not surprising that the IMF should comment on the rapid price growth that local real estate industry has experienced over the past 2 years. It is simply a case of the IMF highlighting that unbridled growth will result in an “asset bubble”, resulting in a “boom-bust” scenario. This,of course,is to be avoided at all costs .

The IMF, like many of the’ responsible industry stakeholders, wish the Dubai property market to derive its growth from economic fundamentals, not speculation; and by doing so, wants to ensure that history does not repeat itself.

Legislative/regulatory action is important

Managing the growth is certainly high on the agenda of the policy-makers and regulators who have already taken action by implementing increases in property registration fees and controls on mortgage lending to try and restrain the rate of growth. Even developers such as Emaar are concerned with eliminating excessive speculation by imposing restrictions on real estate agents from selling any off-plan property, purchased under their names, until it is completed and handed over. How effective these measures will be remains to be seen but the intent is admirable and reflects a very mature and long-term vision for the industry’s development

More legal cases involving landlord-tenant disputes are being filed

While unfortunate, an increase in landlord and tenant disputes is to be expected in a market where valuations are rising rapidly. Put simply, landlords want to cash in on the economic benefits of the real estate market recovery having been deprived of any real rental yield growth during the recession. In summary, they are trying to make up for lost time and, unfortunately, some landlords are being tar too aggressive with their rental increase expectations. It is fortuitous that the new Rental Dispute Settlement Centre, with its extensive resources and streamlined procedures, is being formed to handle the myriad disputes emerging on a daily basis

Developments in the market should become more sustainable

First of all, it is important that we all realize that the recent rates of property value appreciation, the strongest in the world at around 22% YoY, are unsustainable. How to manage a cooling off of the market and avoid the boom-bust cycle which typify many immature markets, while not eliminating long-term sustainable growth, is the challenge that the IMF refers to and which the regulatory authorities, including the Central Bank, are trying to tackle. lf the aim is long-term sustainable growth, then the market must attract long- term committed buyers and investors, not those who are trading property as if it were a commodity, such as the now notorious “flippers” who are partly responsible for any unsupportable inflationary effect on prices. The bedrock of any property industry is its owner-occupiers. They represent the core of industry demand as it is they who view property as a lifelong investment, not just a way to make a quick profit or a place to park cash until the unpalatable situation in their home country settles down.

Important global and local factors
•International bodies. like IMFwork to alert member countries as to any risks there may be in the horizon as local economies impact the global economic arena

•Local authorities, policy – makers and lawmakers take action by entlcting laws and implementing rules and restrictions to curb speculative tendencies in the market, protect investors and ensure long – term growth

•Industry specialists such as realtors and other stakeholders work in tandem with the above to protect client interests, and the market overall

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