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Home values in Dubai are set to take a major tumble into the next year, a trend that started near the beginning of the decade. Real estate developer and investor Binish Qureshi explains that an oversupply of property inventory and a slight downturn in the economy will lead to a correction, which will see prices falling considerably for the remainder of 2019 as well as 2020.

This won’t be the first time the housing market in a city known for its tourism and luxury has cooled off, but experts say this time will be more significant than those in the past. Home prices are predicted to slide 10 percent this year, with another decrease of 5 percent in 2020. It’s not looking much better for 2021, as properties are expected to drop another 3 percent or more.

Overall, home values fell 8 percent after inflation over the year up to February 2019, with villa prices falling slightly more than apartment prices from 2017 to the first half of 2019. Meanwhile, property prices overall have shrunk 25 percent or more since 2014.

The average house price dipped under AED 2.6 million as of March 2019, with some communities such as Dubai Silicon Oasis and Dubai Sports City seeing double-digit taking the biggest hits.

At the same time, residential property stock is set to hit 637,000 units by the end of 2020, which is a sharp increase. This is mixed in with the fact that trade wars, specifically between the U.S. and China, are slowing economic growth and has impacted the real estate market in other countries, including Britain and India.

Looking solely at the economy, Dubai had less than 2 percent growth in 2018, which is the lowest number since the U.S. financial crisis in 2009. Binish Qureshi notes that the projected numbers for the next two years are looking better, but it will depend on a number of factors including whether a government stimulus package will help recovery.

Good News For Buyers?

While those who already own properties in Dubai looking to sell will undoubtedly feel the burn of the slowdown, those looking to buy may be able to tap into the opportunity of owning in one of the most desirable cities in the world. The higher supply may also provide an opportunity for more negotiation as an investor.

In the past three years, there has been a spike in the number of off-plan projects in Dubai, coupled with incentives such as post-handover payment plans that have created an influx of new real estate. These incentive plans allow buyers to pay off the value of the property directly to the developer over a number of years, circumventing the need to be approved for a mortgage by a bank.

Experts are saying the drop in prices is actually a good thing for Dubai as properties were overvalued and will now be an affordable range for more buyers.

Meanwhile, it’s possibly good news for renters, who have seen a decline in rates continues as the excess supply of housing continues. However, Dubai remains the most expensive place to rent in the UAE. Apartments for sale in Dubai are seeing greater decreases than rentals.

Recovery On The Horizon

In order for property values to rebound, Binish Qureshi reports some developers are urging holding off on new projects in the next year to allow time for the market to stabilize. The real estate slowdown has cut deeply into the earnings of some of them, including top developer DAMAC who witnessed an 87 percent drop in their Q1 profits.

Meanwhile, the government has launched a real estate planning commission to aid in regulating the sector by evaluating future projects. The goal is to help balance the supply and demand, amongst other objectives.

Changes to visas can also help reboot the home buying market, making it a more attractive destination for retirees. Those who meet certain criteria (such as owning property in UAE) can now receive a 5-year retirement visa to encourage settling, rather than having to leave the city every 60 days to renew a tourist visa.

Binish Qureshi continues to watch the Dubai real estate market with interest as it weathers challenges and potentially benefits from proposed solutions heading into the near future.