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Dubai, how safe are Albanian investments in this market

2024-12-29 08:47:00, Ekonomi CNA

Albanians, in addition to Europe and the region, in the last two years, have increased the demand for property purchases in Dubai.

Albanian real estate agencies established in Dubai have claimed that the main reason for investing in this market is the high prices in Tirana, especially in the central areas, the very high rate of return on investment through leasing over 20 years compared to Dubai which is up to 10 years.

For certain properties with a favorable geographical position, the return on investment in Dubai goes up to 5 years. Other reasons for the increase in demand in this market are the fiscal benefits offered from zero taxes to taxpayers, the acceptance of cash in purchases and the non-declaration of their origin.

According to the report, property prices in Dubai are currently 40% higher than in 2020. The strong price increases have been driven in part by speculative demand, as a higher percentage of properties remained unsold than anticipated.

Furthermore, the report estimates that sales prices for properties in the luxury segment are overestimated. Despite strong price growth, rental yields remain very attractive at 6-7%.

This is due to a 60% increase in rents. As a result, the risk of a bubble in Dubai is moderate, the report estimates.

What the report says

Miami, the most at risk for the price bubble for 2024. In Europe, the risk is in Zurich

The Swiss agency "Global Wealth Management", in the report "Global risk of real estate bubbles in 2024" analyzes real estate prices for 25 world cities on 3 levels, inflated bubble prices that risk bursting, overvalued prices and fair prices.

According to the results of the report, the city with the highest risk for a real estate price bubble for 2024 is Miami with an index of 1.79.

According to the report's findings, the risk of a real estate price bubble is affected by the increase in sales prices by 50% during the period from 2019 to 2024. The increase was disconnected from the growth rates of incomes.

“The boom in the Miami housing market has cooled somewhat due to significantly higher interest rates on home loans. Real price growth has halved compared to 2022.

However, the 7% annual growth recorded in mid-2024 is almost twice the 20-year average.

In recent years, growth in sales and rental prices has been strongly decoupled from incomes, creating significant imbalances in the housing market, posing a high risk of a bubble," according to the "Global Housing Bubble Risk" index. real estate in 2024".

For 2024, after Miami, the city of Tokyo most at risk for the price bubble is the city of Tokyo, with an index of 1.67, followed by Zurich, respectively with 1.51 points.

According to the report, the risk of a price bubble in Zurich is due to the increase in prices by 25% compared to 5 years ago. As demand for housing continues to rise, Zurich's population has grown steadily by over 1% per year over the past decade, with the exception of two pandemic years.

Rent growth is among the highest in the last 4 years than other cities.

Zurich recorded the strongest increase in prices during the last 5 years, among all the European cities analyzed. The increase in real prices is more than 20% compared to pre-Covid-19 pandemic levels.

Despite the slowdown in price growth due to inflation adjustment, their correction has not been fully achieved, due to the increase in interest rates.

The ratio of income to price growth has continued to deteriorate, as real income growth remained in the low single-digit percentage range. The share of owner-occupied housing was decreasing.

At the national level, declining construction activity reduces the excess demand in Swiss urban centers. As a result, rents have continued to rise significantly and are now a quarter higher than in 2019.

In the last two years in particular, rents have risen significantly more than home prices, which has helped reduce some market imbalances.

However, the risk of a real estate bubble remains high, in our view.

While in Tokyo, which is positioned as the second city after Miami for the highest bubble risk, this city has one of the lowest price-to-income growth ratios of all the cities analyzed.

Although extremely loose monetary policy has contributed positively to demand, in the last 5 years, property price growth in Tokyo was 30% or twice as high as rent growth.

While in cities such as Los Angeles, Toronto, Geneva, Amsterdam, Sydney, Boston, Vancouver, Frankfurt, Hong Kong, Tel Aviv, Dubai, Singapore, Madrid and Munich, real estate prices are determined to be overvalued.

According to the Index, the low risk of a real estate bubble is evident in San Francisco and New York. While in Europe, the risk appears low for cities such as: London, Paris, Stockholm and Milan.

Among the analyzed cities, the market that has shown the lowest risk for a price bubble is that of Sao Paulo, Brazil./ Monitor Magazine