Ever since the Brexit referendum, uncertainty has been the name of the game. The initial fall of the pound following the historic vote and its aftermath set the stage for a wide range of reactions and predictions.
Since then, political complications have led to unpredictability of the British property market. This has both directly and indirectly had adverse effects. It has also led investors to cast a wider net, with the Dubai market offering a promising and much friendlier alternative.
An over-supplied prime market, extra taxes, and a precarious political environment
British real estate seems to be stagnating, with the prime market (properties over £1 million) facing the most difficulties in drawing in buyers and meeting asking prices. Whilst over half of the completed prime market apartments in London didn’t sell last year, developers are working on brand new luxury high-rises already. The so-called ‘ghost towers’ have elicited raised eyebrows in the midst of the UK’s housing crisis.
The prime market is oversupplied, and the abundance of luxury residences has led to lower asking prices, reaching close to the record lows of last year, and forcing many foreign investors to sell at a loss. Agents predict the current trends will continue for some time to come, which means that investors will have to either wait out the slow period or manage losses.
Other major influences include increased stamp duties on second homes, buy-to-let properties, and those for non-domiciled foreign buyers. In a forecast of Brexit’s impact on London’s prime property market, Forbes quoted luxury real estate firm chairman Andrew Langton saying:
‘On the one hand, there is a devalued currency and on the other, there is a mountain of new taxation for the foreign buyer to consider, which is now making them feel very unwelcome’.
Even with exchange rates favourable to foreign buyers, extra taxes and the general glut of properties will continue to affect outcomes for some time to come, with the next couple of years expected to see ups and downs. Whilst some of these factors may be seen as favourable to first-time end-buyers, they don’t paint an ideal picture for investors; particularly those overseas.
Dubai’s prime residential market continues to experience a healthy maturation
Dubai has seen a maturation of its real estate market. The beginning of the year saw some areas experience a decline in prices. However, demand for both new developments and established locations remains strong with promising returns. In addition, new and existing projects further from the city centre provide prime properties with more approachable price-points. Sellers, particularly in the secondary market, have reached asking prices at levels encouraging to buyers, sellers, and renters alike.
New projects continue to draw in buyers. Emaar, the developer behind the BurjKhalifa and Dubai Opera, is also working on several off-plan beachfront luxury developments. Beachfront properties, like those on the Palm Jumeirah, have been strong performers in the past, and are expected to draw further interest. The focus has also shifted to interior design and catering to specific buyers’ wishes.
The Dubai market last year saw a nearly even split between end-users and investment buyers. The outlook for those buying to let seems more positive, at the moment, than selling. However, the uptick in parties looking to buy and own their own home rather than continue to rent cannot be disregarded.
Despite growing pains, Dubai’s property market provides a strong alternative to upheaval in the UK
Even with corrections, the Dubai market remains one of the better places for return on investment. The investor-friendly atmosphere and projections of supply and demand keeping pace with each other, are a strong alternative to the current ambiguities of the UK market.
The UK is currently prioritising steps to deal with its housing crisis and Brexit negotiations. Whilst a number of prime developments are under construction in London, they seem to either vastly favour end-users, remain on hold for the time being, or fail to attract suitable buyers all together. That, coupled with factors like maintenance taxes and other complexities, makes for riskier prospects. Dubai has been receptive to investors, and the recent uptick in activity in all segments of the market points to more favourable investment outcomes, or at the very least food for thought.