A unique asset class, real estate has managed to distinguish itself from the other investment options in the market, such as derivatives, crypto, stocks and gold.
Investors give it preference because even during price fluctuations, it can offer stability. Thanks to rising prices, investors have reaped the benefits and seen long-term appreciation as well.
The background
Demand and supply are the primary reason for the growth in the global real estate market. As the world population increases, so does the demand for housing.
But, land is obviously limited and this results in rising prices. In addition, government initiatives also make the market more attractive.
Governments in Australia and the US provide loans at lower rates. Golden visas are issued by Canada to foreigners interested in buying real estate.
As for tourist hotspots like Malaysia, France and Dubai, they attract international investors through incentives.
But, real estate lending has seen a great deal of volatility since last year. This is due to the rate hike, along with issues with the banking sector.
The demand-supply gap has worsened because of a slowing housing market in Europe and limited supply. Investment volumes have also dipped due to tough financing circumstances.
Dubai’s attraction
As compared to other property investment locations, Dubai attracts investors because it is a tax-free zone.
It has seen a lot of positive investor sentiment and there is an impressive upward trend that can be seen in Dubai’s residential market.
The first quarter saw an increase in values by almost 5.6%, which makes it the ninth straight quarter for growth, thanks to Dubai’s recognition as a global luxury hub and a high demand for second luxury homes.
Therefore, the hike in interest rates is not expected to have a huge impact on the real estate industry. Furthermore, growth is expected to continue in the UAE for a number of reasons.
The reasons
These include the overall low cost per square meter, high rental yields, no property taxes and also the golden visa and residency programs.
These are only a few of the initiatives that have been implemented for inducing investment in the real estate industry in the UAE.
The government has also introduced measures for combating the negative impacts of inflation, like pushing up mortgage rates.
Apart from that, Dubai also sees an influx of high-net-worth individuals who are in search of high-priced, luxury properties.
The non-oil sectors in Dubai have also seen enhanced economic activity due to proactive reform measures and higher oil production.
As opposed to other major economies like Turkey, Singapore, Brazil and the US, Dubai has managed to deal with inflation in a much better way.
This is primarily due to the rapid development that has been seen in the oil as well as non-oil sectors. The real estate scenario in Dubai seems to be evolving.
Even though sales prices have gone up and interest rates are rising, there is a high number of tenants who have opted to purchase instead of relocate or renew their lease.
