I recently read an article in a UAE construction magazine that by the end of this year there will be a crash in property prices in Dubai.
While the notion of predicting is anathema to me, as I consider it impossible to be accurate about what are at best intelligent guesses, I do feel it merits a discussion.
The thought that the market might be heating up is perhaps valid in some ways, and surely there is an issue of demand and supply.
Developers of property projects in Dubai do not believe this; I see their cranes and concrete mixers in isolation to what is happening in Dubai and the region. The fact remains Dubai has adopted a more open and enabling economic model as it has been doing and this has to be seen in the context of the immediate region it caters to and the situation in the home countries of the investors.
Property investments are always led by price considerations, ease of living, investment climate, legal systems and other elements that make the property investment sit comfortably within the decision-making process of an investor or a resident buying a property.
Based on the price comparisons of leading markets around the world, one will realise that the price value offered in Dubai is not at all out of the range, but indeed in many a case it is attractive.
A two-bedroom apartment near the Docklands in London could be in the region of £280,000 (Dh1.94 million); and if we were to move into the centre of London, closer to the posh residential areas, those numbers rocket through the sky.
An apartment in, say, Brooklyn in New York City (Brooklyn while becoming more posh is not exactly Park Avenue) costs about $900 (Dh3,306) per square foot, and this usually is a renovated loft or building.
In the South of Spain an average chalet several kilometres inshore from the sea would cost about 400 euros (Dh1,923) per square foot, and in some areas even as high as 600 euros (Dh2,885).
In Dubai, the top end of the villa market would cost about Dh1,000 per square foot, and some as low as Dh600.
The obvious strategy would be to move away from prices to other elements of the argument. I agree that the issue of quality is one of concern to me.
A great deal of the construction has been done at standards that are not entirely the best, and this is something that has to be corrected from the design stages through to the finished stage. I see some developments that have been launched with very colourful Spanish sounding names and promises of openness that were merely kept up to the time the ink on the brochures dried and from then on the mad rush to buy or sell took over the best of intentions.
I have often said that, in the months ahead, the hallmark that buyers seek will be quality, and this will have to be more than just promises.
Legal aspect
Another element is the legal system that will protect the investment, and in this respect there is no denying that a number of developers have used words such as freehold rather too liberally.
It is understood that a comprehensive law might be issued soon, which will allow a structured leasehold for buyers, much like those one sees in the London property market. Whatever the shape of this law, the important thing is that it is badly needed, particularly as a legal net for the investors and to clear the air about perhaps the most often asked question.
Overall, the pace of development has to be seen in the context of the region and, indeed, once the laws are settled and the developers get a sense of building better quality products, the upside in the market will still remain.
I do not predict any boom or bust scenarios but do believe it is a process that is dependent upon a number of variables. Given a no-tax policy, my guess would be that buyers from the higher and more expensive markets would be looking to see this market as an alternative option. While a lot of supply is committed, it is trickling in slowly, given the longer construction schedules but to predict a boom or a bust at this juncture makes little sense.
If anything, overall I see more reasons to feel confident of the best to come than to feel nervous.
The writer is the UAE-based president of Sher Consulting.