How to Predict Property Price Fall? Initial Playground.

Supply of new properties in the market is definitely playing a major role in the price fall. However, the reason for price fall is not so much the quantity, but the term of purchase and the financial abilities of the investors. As we previously studied, buyers purchasing the properties with post-handover payment plans or with the help of banks, and not living in purchased properties are forced to grab tenants with the attractive prices which are slightly below the market trend.

More delivered properties create more landlords having monthly liabilities. Now, let’s track the past in order for the future to be forecast.

In this research, I will be analyzing the previous years. This is how we can forecast the future - based on past trends. This research, will be built on the assumptions supported by the real facts from the nearest past.

In Table 1 we see that the number of total properties had increased by 5.5% from 2016 to 2017, while the population increased by 10.3%. Every year we are having around 20,000 properties delivered in the market. These changes, to a certain extent, participate in leading the real estate market to the price fall. In Table 1, we see that the average Property Monitor Index has fallen by 4.7%, while at the same time, the real case of the One Bedroom Apartment in JBR is showing the drop of 9.5% just in 1 year.

Let’s build a model by connecting all the numbers with each other.

17,987 Delivered Properties in 2016, have decreased the price by 9.5% for One Bedroom Apartment in JBR in 2017, while the population increased by 10.3%. It’s an important moment, to track the growth of population. Logically, the higher population and lower number of properties will lead to to the price increase and vice versa. Population is one of many components that affects the price of the property.

Nonetheless, for the last several years, the population of Dubai is growing. As per World Population Review (www.worldpopulationreview.com), Dubai’s population is estimated at around 3.32 million people in 2018, which is another increase. Moreover, every new property-launch is coming with more affordable payment plans, greater perks, and attractive prices.

Conclusive Statement

EVERY SINGLE NEWLY DELIVERED PROPERTY IN A YEAR IS DECREASING THE PRICE IN THE REAL ESTATE MARKET BY 0.00053% IN THE NEXT YEAR, while the population is growing by 10.3% every year.

Prediction Methodology

To conclude all said, initially, we need to shortlist indicators we are willing to consider for the forecast to make it more close to an actual figure. We need to make sure, that year-to-year the value and character of shortlisted indicators are similar. For example:

1. The Fact - on new launches more attractive payment plans, perks and prices are offered;
2. The Fact - number of delivered properties in a year is almost similar;
3. The Fact - population in the country is growing at a similar pace;

Above are the main indicators, which we’ve considered during this overview. In your particular example, you can include more factors (e.g. economic, average salaries, average prices, etc).

Since we are sure, that the market’s movement is in the frame of the latest trends, we can now experiment with a forecast. By simply multiplying 0.00053% (price fall per single newly delivered property) by the number of newly delivered property in the current year, will present to us an approximate price fall (%) in the next year.

Final Calculation

In 2018 the number of delivered properties were around 17,000*. The rental price for One Bedroom Apartment in JBR (we analyzed above) will fall for another 9.1% in 2019.

So, new estimated rent for One Bedroom Apartment in JBR we analyzed above will drop to AED 77,000 in 2019.

Definitely, this forecast is not a final model we can build the state economy on, but it’s the PLAYGROUND, where we can experiment with building a prediction, considering the latest trend, observation, and concept, which connects with the actual reality and helps to foresee the upcoming picture of the industry.

By Akhmed Idigov