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Price Differentials In Real Estate In Dubai

1823 words - 8 pages

To Tikku Brokers,

Introduction

Real estate in Dubai is a very extensive topic and it is a very large market indeed. This essay will explain the concept of market forces and show how it can be displayed on the market of Dubai, thereby providing a response to the research question, “To what extent do market forces determine the price of rented accommodation in Dubai?” One can identify large price differences between two similar houses, whilst keeping square feet and housing type relatively constant. Yet, the key factor that causes these price differentials is the concept of demand and supply, for reasons such as location. This report will analyze 3 specific cases including studio apartments, 2-3 bedroom apartments and 3-4 bedroom villas and generalize the factors that cause these price differentials. After recording this data, this report will conclude to the extent to which demand and supply comes into concept, thereby answering the research question in an analytical procedure. This report will analyze properties in various areas of Dubai and follow the assessment task directly.

The rental market in any place in the world is a unique business. To a certain extent, demand and supply have a large say in determining prices just like any product in the world. If there exists an oversupply of homes in a given area, rental prices will fall indefinitely. However, there are some limitations to the law of demand and supply in the rental market. Unlike manufactured commodities in which you can allocate your resources differently, you cannot move the excess amount of homes out of that area to keep prices stable. This is one of the unique features of demand and supply in the rental market. On the other hand, if there is a shortage of supply from which there aren’t enough houses or land in one given area, prices will rise indefinitely since one cannot insert land in that space. So producers cannot just ‘increase’ supply if there is an increase in demand (Kimmons). This commodity will always depend on local conditions. Dubai’s rental market is unique due to the freehold laws allowing foreigners to buy freehold property (Kumar).

Presentation of Results from survey

Analysis of Data

Studio Apartments

In Dubai, studio apartments are usually inhabited by the working class, as they are single roomed apartments consisting of the necessary accessories such as the bed, kitchen and restroom. As you can see from the graph on Page 5, the priciest property was in Marina at AED 90,000, followed by a property in Bur Dubai at AED 66,000, and lastly the property in Sports City at AED 40,000 ("Residential…in UAE (up to Studio)."). I was expecting this pattern of results from my prior knowledge of Dubai. In order to get a more detailed analysis of this data, each property must be traced to its location and there should be some detail that would be significant enough to affect its price.

Marina is the most...

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