The price difference between UAE buyers and sellers falls as potential buyers prefer renting for the moment

Expectations for a reduction in prices among buyers decreased to 63 per cent in May, as more tenants sign new leases, with each side converging on value, according to a Property Finder report. The difference between the expectations of UAE residents buying homes and what sellers are demanding has narrowed even further as the real estate market picks up speed after a period of stagnation following the regional crisis.

According to the latest report by the property website Property Finder, the percentage of buyers who anticipated price drops fell to 63 per cent in May, down from a high of over 70 per cent right after the start of the war. It was the second month in a row that the percentage had fallen, despite listing prices remaining largely unchanged by sellers relative to before the war.

Prior to the conflict, buyer sentiment in the UAE was relatively evenly balanced. The Property Finder buyer sentiment survey from January to February found that buyers were almost evenly split, with 36 per cent anticipating prices would decline, 35 per cent predicting an increase, and 29 per cent believing prices would remain constant.

With the onset of the war, the dominant mindset was that of buyers looking forward to reductions in prices and delaying purchases pending a decline. This mindset has eased month by month to 63 per cent in May, marking a clear but gradual adjustment.

Sellers, on the other hand, have shown very little movement.

Property Finder’s proprietary listing price index shows that asking prices for properties stood at about two per cent below the pre-crisis level in May, compared to one per cent below the pre-crisis level in April. The negotiation gap is narrowing due to the stance taken by sellers.

Price discovery in action

Cherif Sleiman, Chief Revenue Officer at Property Finder, has explained this phenomenon as “price discovery,” where buyers and sellers begin reaching a consensus about what a home is worth.

“When the gap in price is too large between buyers and sellers, a transaction slows down, and this is the very gap that is closing. What’s important is the way this gap is being closed — by expectations stabilising rather than panic coming from either side. A market in which more participants have stable price expectations is on more stable ground than one moving between fear and hope, and stability generally needs to be there first. This is because, typically, both sides need to narrow this gap before transactions start growing,” he said.

Demand has not only fallen but has also been redirected, with an increasing number of consumers opting to rent now that prices are beginning to stabilise. While the number of new rentals in May was only 20 per cent lower than before the conflict, the March figure was 32 per cent lower.

Close to half of all May rental transactions were made by people actually moving into new homes rather than simply renewing their old leases — up from 41 per cent in March, and a positive indicator of rental market strength.

The gap narrows every day

According to Alessia Sheglova, CEO of Dacha Real Estate, “the change is driven by consumers’ strategic, rather than panicked, behaviour.”

“To us, the market seems to be driven less by panic and more by a disciplined approach on the part of both consumers and vendors. Consumers bargain harder and use more data when deciding how much to pay, but at the same time, they understand that reasonably priced properties are not being deeply discounted right now. Vendors, in turn, continue to hold their ground, especially when the property in question is well located and sensibly priced,” Sheglova added.

According to Sam McCone, Managing Partner of McCone Properties, the gap narrows daily.

“When the dispute erupted, we noticed a lot of people making offers well under the asking price, thinking they would find plenty of people wanting to sell at all costs. They did, but not nearly as many as expected. Today, although buyers continue to haggle, the low-ball approach is disappearing, since buyers understand that when they want to buy a house, the best option is to do it — but not at a crazy low price. Sellers who price reasonably are making transactions, and the deals that failed to materialise earlier in the year are beginning to take shape,” McCone said.