Dubai has always remained an eye catching city in the gulf due to provision of its good employment opportunities, attractive vacation spots, better living standards and endless business benefits. Investors dealing in Real Estate found excellent opportunity to invest in Dubai properties as they could increase their profit margins and could get higher rent in Dubai by purchasing homes, villas and apartments and then renting them later on. This led to an increased investment in the real estate sector of Dubai but soon the market got saturated. Since then the market is facing problems and the property prices and rents have reduced a lot.
The major reasons for the fall in prices and rents of properties in Dubai are oversupply and fragile demand due to population shrinkage and global economic recession. Companies started downsizing and this resulted in the tenant movement from Dubai. There are no more significant employment opportunities which force the immigrants to come to Dubai and take its apartments on rent. So, the demand has greatly reduced and on the other hand supply is increasing. The over supply has given the remaining tenants good bargaining power and the property owners are ready to accept lower rents. Thus the overbuilt market of Dubai is putting pressure on rental prices of different apartments, houses and villas and forcing the landlords and property owners to decreases the prices further.
The year 2010 was of great significance as it showed stabilization in rental prices in some areas of Dubai due to quality of amenities provided and the balance of demand with supply. Standard Chartered bank has predicted a rebound in 2011 as more investment opportunities will open up and companies will hire new staff. This will bring more foreign nationals and will increase the demand of Dubai property deriving the rental values high. But according to my perception, a slight increase in demand will not result in sharp increases in rental values as the oversupply will neutralize the effect of increased demand.