A sustainable business model with healthy cash flow, backed up with credibility and commitment to customer happiness, will be the key differentiator
The UAE's real estate market has become more 'real' in its true sense - full of real buyers, real brokers, real developers and real money in 2017. Gone are the days of speculation, hot money, exchanging artist's impressions with high premium and overnight profits and building castles in the air.
Now, the real buyers and investors ask all the real questions to the genuine developers and tick all the boxes before making their decision. It's a buyers' market and customer is king.
Continued vigilance by the Dubai Land Department (DLD) and the sound regulatory environment steered by the Real Estate Regulatory Agency (Rera) helped Dubai's real estate market to become more mature and stable over the last few years. That's why, like any other matured market, the emirate's real estate market will go through the normal economic cycles of ups and downs - with slight variation from time to time.
However, the current Dubai real estate market scenario is marked with challenges and opportunities. The market situation continues to be tough due to the ongoing political climate in the region, ample supply and soft prices.
The current downward cycle that started in the second half of 2017 appears to have either approached the bottom or bottomed out - depending on which research report one trusts more. The decline in prices seems to have been arrested somehow with either no or marginal reduction.
Most research reports are indicating a market recovery in the next few months - as early as the first quarter of 2018, due to the anticipated surge in demand in preparation for Expo 2020. Some reports suggest that off-plan sales have picked up - while at the same time, the market might face a supply glut.
So, the current situation is marked with contrasting realities. Although there is a sense of an oversupply in the market which could be felt by declining prices, a surge in off-plan sales offers a different situation. There are more than 55,000 homes getting delivered in 2017 and 2018, including more than 25,000 in 2017 alone - that is putting pressure on price.
One could see property prices - studio apartments - starting at Dh280,000 at The Pulse at Dubai South - which was unheard of in the last 10 years.
Off-plan continues to attract investors due to attractive returns. There has also been a rise in end-user buying since many believe that prices have bottomed out. According to the DLD, 52,170 land and property transactions worth Dh204 billion were concluded in the first nine months of the year. At this rate, the full-year transaction value would exceed Dh272 billion - higher than the total value of land and property transactions worth Dh259 billion recorded in 2016 and Dh267 billion recorded in 2015.
Some of the top developers - such as Emaar Properties, Nakheel, Dubai Properties, Damac Properties and Azizi Developments - continue to make major announcements on new projects that are being absorbed in the market. Buyers are seen lining up to buy properties in some of the project launches. This reflects a growing investor and buyer appetite for new properties - while the ready-to-move-in properties might take time to get absorbed.
This also reflects the ground reality that properties could be snapped up by buyers if they find it at the right location, right quality, built by the right developer and the right payment plan.
Along with growth in off-plan sales, the most significant development has been a plethora of back-ended payment options being offered by developers to woo customers. The rise of Dubai South as a favourite destination for investment was another major development.
Despite challenges, there are opportunities due to the upcoming Expo-2020, rise of affordable housing and rising demand from neighbouring Asian countries, such as India, Pakistan and China.
When it comes to real estate, historically it has been emphasised that property is about location, location and location. I see real estate as more about trust. For property buyers and investors in Dubai, it is also about the developer's credibility.
However, a sustainable business model with healthy cash flow, backed up with credibility and commitment to customer happiness, will be the key differentiator between real estate developers in the coming years. Developers will be required to be more agile and customer-focused to be able to gain public trust in future.