Four months after rejecting a broker’s advice to slash his rent demands on a new Spanish-style villa in Dubai, the home owner was ready to accept a 20 per cent cut on the still vacant property.

The broker, Akbar Ladak, wasn’t surprised. More landlords are accepting that they have to lower their sights, and for every one still holding out for a long-anticipated market rebound, plenty of others are willing to take what they can right now, he said.

Dubai has seen predictions of a property rebound miss the mark again and again over the past two years. Optimism about a recovery in 2017 has given way to quiet resignation that the slump may persist for two to three years after oil price increases, key to the Persian Gulf sheikhdom’s economy, failed to spark an expected jobs boost.

“The amount of property bought for investment purposes and now listed on the secondary market is quite substantial,” said Mohammad Kamal at Arqaam Capital, one of many analysts who had expected a big pick-up in home ownership demand last year. “That suggests that buying right now won’t result in a resale later and that’s keeping people away.”


Residential rents fell 10 per cent to 15 per cent last year, according to various estimates, while selling prices declined at a slower pace. A recovery isn’t likely before 2020, when Dubai is set to host the World Expo, S&P Global Ratings said in a report last month.

Transactions of completed homes last year were 24 per cent below the 10-year average, according to Phidar Advisory. Despite developers’ attempts to delay the delivery of properties already sold, supply growth is outpacing demand for rentals. Fewer than half of the properties sold in advance by developers were delivered in the three years through 2017.

“After a bad 2016, the hope was that the economic situation would get better,” said Sanyalak Manibhandu, an Abu Dhabi-based equities analyst at Fab Securities. “The macro situation didn’t get any better and the oil price improvement didn’t feed through to the rest of the economy.”

There are no predictions that the slump will resemble the city’s property crash a decade ago. Policymakers have since restricted mortgage lending and forced buyers to commit more hard cash up front since then, helping cushion the market from a drop. Still, sales of homes ahead of construction fell 36 per cent in January from a year earlier.

Local residents, who helped lift Dubai from a crash fuelled by buyers from abroad, are holding off on purchases as they wait for prices to hit bottom. Foreign investors from Russia to Saudi Arabia are also being deterred by unfavorable currency movements, austerity measures at home and concerns about political risks that surfaced after a spat with Qatar chipped away at the Gulf’s status as a beacon of stability in a tumultuous region.

Developer Woes

And then there is the constantly growing supply in a city that can keep expanding into the desert. Despite attempts by developers to delay the completion of properties, the pipeline of sold apartments and villas outpaces current demand.

Earnings for the city’s developers reflected the challenges and “they all missed estimates,” said Manibhandu of Fab Securities. “That’s because analysts were too optimistic or because the situation got worse in the latter part of the year.”

Dubai developers still enjoy profit margins that would be envied by their global peers, mostly because they can use free or cheap land provided by the state. However, even that will come under pressure as local buyers baulk at the kind of prices that had been readily paid by foreign investors.

Hussein Sajwani, the billionaire whose Damac Properties Dubai Co is developing Donald Trump-branded golf courses in Dubai, remains optimistic. The owner of 72 per cent of the developer said in a January interview that he expected sales to grow about 7 per cent this year. He wants to remain the company’s majority owner even though he said he would be “more than happy” to sell as much as 15 per cent of his stake.

Not all owners have given up hoping for the elusive rebound. Ladak, a broker at Vibgyor Real Estate, said his client backtracked after a tenant agreed to rent a house in the new Arabian Ranches neighbourhood at a 20 per cent discount. He sought a 15 per cent cut instead and the deal fell through. The house remains unoccupied.

That’s not much of a problem for Ladak. When he fails to convince a landlord to accept a lower rent, he turns his attention to helping the tenant get a property at the desired price by approaching other owners in the area. And that’s easy with the abundance of empty new homes.

“We try to meet our landlords’ expectations,” Ladak said. “But we don’t have to lose a tenant when there are a lot of similar properties available.’