There was a massive 42 per cent increase in house prices between the last quarter of 2007 and the first quarter of 2008.

Additionally, high rents triggered many people to buy property rather than spend on renting, according to Sadallah Abed, property analyst at Colliers International.

The market was a property playground swarming with speculators and investors who wanted a piece of Dubai real estate action.

But as the global financial crisis hit property sectors worldwide and undermined confidence in the banking sector, a few reports published in early summer predicted a downturn in the Dubai real estate market as well. For example, a Morgan Stanley report forecasting a then-unlikely 10 per cent drop in property prices by 2010 triggered deep discussion among industry experts.

By the end of the year, concerns about the UAE property market were growing, particularly following announcements of job cuts and projects being put on hold.

The global credit crisis further complicated the situation as major home finance companies and banks restricted lending. Less mortgages mean less buying and, unfortunately, higher rents.

"With the lack of mortgage facilities, demand for rentals is actually going up, not down," Nicholas Maclean, managing director of CB Richard Ellis, said earlier.

Developers like Omniyat PropertiesOmniyat Properties and DamacDamac are now rethinking payment plans in light of cash-strapped banks and other mortgage lenders.

Dubai's Real Estate Regulatory Authority (Rera)Dubai's Real Estate Regulatory Authority (Rera) have continued to tighten and implement further regulations in an attempt to highlight the importance of transparency.

The end of December saw the creation of a compulsory online registration site for tenancy contracts, as Rera prepares to finalise the rental index some time in 2009.

The index will help to create zoned areas within Dubai, each zone having an average rental rate.

However, some residents in Dubai have questioned Rera's effectiveness, with dishonest developers still wheeling and dealing in the market and rental rates still high. They argue rents can only be set by market conditions, not by Rera.

The good news is that all of this combined should spell the end of the dreaded one-cheque policy, Marwan Bin Galita, chief executive of the Real Estate Regulatory Authority (Rera) said.

"This is what I'm strongly trying to introduce. People should have the choice, to pay monthly, or quarterly or in six months," Bin Galita said.

But it is hoped that by mid-2009, because of these regulations and genuine efforts to stabilise the economy, the current financial situation will cast no more shadows and Dubai's property industry will be stronger and more successful in the long-term.

Though the last three or four months have been decidedly grim, most analysts believe 2009 will be the year of the end-user, with liquidity awash in UAE banks and mortgage-lending institutions and property prices coming down to reasonable levels.

By Suzanne Fenton

© Gulf News 2009

 

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