The Market Is Accelerating: Signs and Risks

Dubai's property recovery has gained speed. Prices in many established areas have risen significantly over the past year, transactions are increasing and off-plan launches are attracting queues again. After years of caution, the mood has turned decidedly optimistic.

What is driving the acceleration

• Economic growth: tourism, aviation, trade and retail are strong.
• Safe-haven demand: buyers from the region continue to arrive.
• Limited new completions: fewer homes are being handed over than during the boom.
• Expo optimism: the bid for 2020 is lifting sentiment.

Warning signs

Rapid price rises, the return of speculative buying at launches and rising rents are reminders of the conditions before the last correction. Some analysts have warned that the market may be moving too fast.

Differences from 2008

Escrow rules, registration requirements and more cautious lending provide better protection than in the last cycle. A larger share of buyers pay in cash, and many intend to live in their homes.

Advice for buyers

Buyers should resist pressure to commit quickly, compare prices with recent transactions and focus on properties with sound fundamentals. Paying for quality is sensible; paying for hype is not.

Advice for owners

Owners who bought near the bottom may consider whether to take some profits or hold for the long term, depending on their objectives.

Signs of speculation to watch

Several warning signs indicate when a market is moving from healthy growth to speculation. Queues at launches made up of buyers planning to resell before completion are one. Rapid resale of off-plan contracts at large premiums is another. Prices rising much faster than rents, and buyers committing without seeing floor plans or reading contracts, are further signals. Easy credit and aggressive marketing often accompany these trends. Some of these signs are visible in Dubai today, though not on the scale of 2007. Investors can protect themselves by focusing on properties they would be happy to hold for many years, and by avoiding purchases whose success depends entirely on selling to someone else at a higher price in the near future.

Our view

The market's momentum reflects real strengths, but caution is warranted. We encourage clients to remain disciplined and to avoid speculative decisions in a fast-moving market.