Perhaps the most common question I receive from various stakeholders in the property market is something along the lines of 'what will the property market look like in X months, or even X years?'

To answer these types of questions accurately and fairly, two things need to be done. Either we use a time machine, travel into the future, take notes and then come back and analyse them; or the other, simpler method is to consult a crystal ball, see what it tells us and report back. Unfortunately, I don't have a time machine, but I do have a crystal ball; however, it has proven to be somewhat unreliable.

For the reasons stated above, it is impossible to answer this question accurately; however, it is very feasible to provide an unbiased, well thought out forecast of the best market. To do this, it is necessary to look back at the past, analyse market trends and then make an estimate for the future.

Generally, property markets, especially mature ones, go through a four-stage cycle. Starting with the trough phase, also known as the buyer's market, property prices and rents will be at their lowest levels. Dubai experienced this phase in 2009 and 2020. Recovery is the next stage of the cycle and is an equalising market that usually sees an increase in enquiries, rising sales and rents and a return of prices. Dubai witnessed market recovery in 2011 and 2021-2022.

Today we are witnessing the third phase of the cycle, the upward phase, also known as the seller's market. Dubai witnessed this back in 2006-2007, 2013-2014 and according to the latest data, since the beginning of this year, demand seems to have increased dramatically, with faster sales, faster rental increases and stronger price growth.

That leaves us with the fourth and final distinct phase of the downturn, 2009-2010 and 2015-2017. I'll come back and talk about this in more detail, but for now, let's focus on the upward phase that the Dubai property market has been in for the past six months, which is probably the strongest phase ever.

There is no doubt that a market correction is coming; this is just a prediction based on basic market fundamentals. This means that price caps are likely to materialise and rents will eventually stabilise. It is only a matter of time.

Evidence-based historical data clearly shows that over the past six months, investor and owner-occupier demand has been favouring smaller, less expensive properties. Whilst the top end of the luxury market appears to be unaffected at the moment, the rate of growth in capital values has slowed over the last few months. At the same time, smaller villa/townhouse communities, as well as condominiums in relatively affordable locations, have seen strong price growth recently. This is exactly what we saw during the upturn a decade ago, in 2013.

So far, no one is predicting the market will "burst the bubble" like it did in 2008 or "overheat" like it did in 2014; and I don't think so either. This is because demand remains strong, with limited supply in some areas and delayed project delivery in others. However, the cost of borrowing has risen to record levels due to high interest rates; this is likely to lead to healthy growth in the mortgage buyer market rather than exponential growth in the cash and off-plan market - at least in the medium term.

At least in the medium term.

I promised to talk more about the downturn phase, where house prices fall, buyer interest wanes and the market as a whole becomes very cautious. As mentioned earlier, Dubai has gone through this phase twice so far. Prices are not forecast to peak in the second half of 2023, at least not in most neighbourhoods in Dubai. Nonetheless, initial indications from the last downturn suggest that the top end of the property spectrum suffered the worst capital losses immediately after peaking, while most of the rest of the market has seen modest price corrections.

As a result, Dubai's property market is set to remain strong through the second half of 2023, as price growth in affordable neighbourhoods is likely to accelerate, while capital gains in mid-to-high-end properties slow. Rents continue to rise, especially for newly signed contracts; annual renewal rents for existing tenants are also likely to rise following the recent update to the RERA rent calculator. In high profile, highly sought after locations, landlords will accept one or two cheque payments.

As the latter months of the year approach, investors and homebuyers alike may need to be extra cautious, use due diligence and stay informed. As with any prediction, new evidence emerging in the future may affect the timing of the above predictions, unless of course the crystal ball predicts otherwise.