Soaring local increase and low US interest rates are contributing the market with negative real interest rates. That economic force is not away for summer. In this environment, for those who leave their property purchase until this autumn is likely to find that prices have moved at least another 10% higher over the summer months.
All markets have momentum and the momentum in the Dubai real estate market has grown in 2008 with the rate of advance in prices accelerating to a level not seen since 2004 and the early days of the boom.With prices up 10%-15% in April-May they are not about to slow down very much over the summer.
Indeed, it is perfectly possible for prices to carry on rising despite a slowdown in transactions. In fact, this is a reason for increases: Sellers are keeping their property off the market in anticipation of rising prices and therefore creating a shortage that, not surprisingly, produces higher prices.
Autumn sales
It is a debatable point whether property owners returning from their summer vacations will suddenly decide to sell. There will always be those who wish to cash-out because they are going home or starting a business.
But those with a long-term investment commitment to the Dubai market, and this is a growing market for owner-occupiers and landlords, then sitting on an asset that is rising in value makes obvious sense.There is an argument that as capital values rise then rental yields are falling – because rental rises may not keep up with capital appreciation.
But then market reports suggest 20% annual rental inflation – which is hardly going to put off landlords – and yields have to be compared to interest rates, which at 2% on deposit accounts are not an attractive alternative, especially with inflation in the high teens.
