Predicting the Dubai property market

16 November, 2007
Here's an interesting excerpt from an article by Ryan Mahoney of The Gulf News, published today.

If I had a dirham for every time I was asked what is going to happen to property prices in this market I would have built up a tidy sum by now! The truth of the matter is that nobody has the definitive answer, we can debate for hours on end and come up with a likely scenario, but without a crystal ball it's tricky. It is possible however, to look to other similar markets and consider the natural cycle of real estate for guidance so for what its worth, here are my thoughts on one of the most frequently asked questions in Dubai.

There are many factors that affect the price of property but the biggest single factor that has influenced the Dubai market over recent times has been supply and demand. At a time when the majority of units are still under construction, we have seen an incredible level of demand for all types of properties; from apartments to villas and warehouses to office towers.

When the freehold property law was introduced, the Dubai property boom was born. Attractive launch prices along with unique and aspirational projects such as The Palm Jumeirah and The World made Dubai an investor's paradise. Speculators looked for quick returns by capitalising on an untapped market, expatriates bought somewhere to live and holidaymakers looked to these shores for a second home.

Ever since, demand has continued to increase, pushing prices up with it, providing investors with fantastic returns, both in terms of capital growth and leasing revenue. Such increases have spurred more people to buy here, creating further demand and driving prices up.

The massive influx of people, driven by Dubai's positioning as a major business hub for the region and a luxury holiday destination, has created an insatiable demand for property. All new residents need a place to stay and in the same way, multinationals need business premises. The pace of growth means there hasn't been enough property to go around and therefore, any completed property available for sale or lease has been at a premium rate.

The second biggest factor affecting the supply shortfall, and therefore prices, is delivery delays. In many cases, construction has taken far longer than was ever expected, adding further pressure to an already strained market.

So getting back to where I started; what does the future hold? Dubai is currently a hive of construction activity and as each development reaches completion, more products become available. However, as these projects are delivered, there will, of course, be more and more people relocating to Dubai for work, the number of which will affect how long it takes for supply to even out. The nature of real estate suggests that at this point we could see a levelling of prices.

Ultimately though, I don't see anything drastic happening to prices. Dubai still has a lot to offer buyers. With increased regulations adding further credibility to the market, and the current strength of some foreign currencies making Dubai property more affordable, as well as some exciting new projects underway, demand should remain a firm favourite with buyers for some time to come.

Inflation sparking price rises in Dubai

13 November, 2007

Inflation is sparking property price rises in Dubai as supply continues to lag behind demand. Fears from some quarters that an imminent oversupply of real estate in Dubai would depress the sector in 2008 have now been pushed back by most observers to 2010, due to construction capacity constraints and the continued tide of new immigration. Indeed, the main concern is that local inflationary pressures are going to drive rents and prices higher.

It was not very long ago that Dubai property watchers believed that this autumn would be the moment that the market tipped into oversupply, with the prospect of declining prices and rents in 2008.

But today it would be hard to find a single analyst supporting that view. The new consensus is that construction delays and the continuing economic boom in Dubai mean that it will be 2010 at least before the proverbial shoe drops, and even then the slowdown will be gradual rather than a bursting of a bubble.

Why is it that the harbingers of doom have been so convincingly trounced by the outcome this autumn?

The short answer is that analysts overestimated the speed at which construction projects could be completed in Dubai. According to the original schedule, The Palm Jumeirah should have been completely finished by the end of this year, and yet the contract for the landmark Trump hotel complex has only just been awarded and the hotel sites on the crescent remain vacant.

Analysts also underestimated the strength and longevity of the Dubai economic boom. Again this can be forgiven, who would have forecast oil at $96-a-barrel even two years ago?

What is on the agenda instead for the immediate future is a period of further supply and demand pressures on the local housing stock in Dubai. That will mean higher rents and selling prices. This will be compounded by the impact of falling local mortgage rates. There will be more money available to pursue the limited housing stock and prices will be driven even higher.

At some point these pressures will ease. Perhaps the world economy will slow and consume less oil and that cools the Dubai economy with a lag of around six months. And eventually the mega projects will deliver a supply of property nearer to the level of demand.

However, the fact of the matter is that earlier wary forecasts have proven misleading. At least now observers are taking a more detached and skeptical view of the information on offer, and that might mean that the conclusions drawn are that bit more accurate. But we will probably have to wait until 2010 before that can be really known.

Personally I put little sway in the wary forecasters; its easy to play safe but rarely does safe equate to gains. My view is that no-one can predict the longer term future, but if gains are there to be had now, 1 - 3 years, then strike and take what you can and don't miss the boat. I like to compare the whole situation with the current UK market: invest in UK now and you may achieve some moderate appreciation over the next 2 - 5 years, may, but nothing stellar. In fact, right now in the UK the wary observers are predicting a slight correction in 2008, which is not good for investors. Invest in Dubia property now and you get the short-term gains, the huge potential for continued long-term gains, and in my view a lot less risk than the UK. Will your Dubai investment be underwater in 1 year's time - HIGHLY unlikely.

Finding the right property

24 October, 2007

Looking for property on the Dubai real estate market can be a daunting task, there is just so much choice and variety. Most overseas property investors are only familiar with the largest of property developments such as the Burj Dubai or the Palm Trilogy, yet there are so many more that can also be more affordable simply because they haven't received the same level of hype. Thats why its important to seek expert local advice when considering investments in Dubai.

The most important thing that property buyers need to know is what exactly is available on the market. Besides the most commercial of projects, there are also a good variety of projects that cater to property investors that want something more affordable. Whatever your taste, there really is property to suit every need, from small apartments to penthouses, comfortable villas to luxury mansions.

Property prices stretch across quite a large range, with studio apartments available from around £50,000 to £140,000. Larger apartments can range up to the £700,000 mark and for villas, as they tend to be in short supply, they can range from around £300,000 for a smaller villa or town house, upwards beyond £700,000 and even in some cases beyond £1.5m for exclusive luxury villas and mansions. At the top end are luxury custom personalized penthouses which stretch all the way to £7m.

The prices of property really depends on the amount of square footage, location, the type of project and the number of units available. Fortunately, the sheer variety of projects allow you to pick and choose the property that is right for you

We work with the region's largest independent developer, and have access to an unrivalled variety of property in the region - residential, offices, and retail - and with project ranging from around £50,000 up to £7m there is something to suit every investors budget.

See our property lists here online or contact us now to speak directly to an expert.
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Dubai property boom to continue

October 24th, 2007

The property boom in Dubai will continue and is set to expand further across the UAE, says Khaleej Times.

This according to AME Info which studied the attitude of property buyers in the UAE in a survey entitled "Buying Property in the UAE".

"The AME Info Buying Property in the UAE survey, part of a wider report on property in the region, found that Dubai is still the emirate of choice for many buyers," said the online news firm's editorial director Rob Jones. "But as prices skyrocket, it is having a ripple effect that is reaching other emirates."

He added: "Overall the survey show there is a thirst to buy in the UAE — many people see it as a good investment and want to get in before prices go higher to escape the annual cycle of rental increases."


The survey said that 84 per cent of the more than 1,300 respondents plan to buy property in Dubai. It stressed that almost half of those wanting to own property plan to live in it, showing interests to stay longer in the UAE.

Annual property prices to increase 25 per cent

October 19th, 2007

Annual property prices in Dubai are set to be up by 25% over the next ten years said a senior official of a Dubai based developer. He also predicted that 45,000 additional units of property are needed per year in Dubai until 2020.

Announcing it at Cityscape, a trade show for institutional investors in the real estate industry, the developer cited Dubai’s growing population and steady economic growth as the reason.

Property boom set to expand throughout the UAE

October 18th, 2007

AME Info, the leading provider of online business news in the Middle East, today published the results of a new survey, 'Buying Property in the UAE', profiling the attitudes of property buyers throughout the UAE.

The survey conducted with over 1,300 respondents who use the free AME Info service, reported that the Dubai property boom is on course to continue and is set to expand further across the Emirates, with purchasers looking to Sharjah and Ajman as destinations of choice.

The survey also reveals that of the 84% of respondents who plan to buy property in Dubai, almost half plan to live in the property, demonstrating a long term commitment to the UAE. Of the 60% of the respondents who said they were planning to buy in the UAE, 39% of these said they would buy off plan as it was a cheaper option - seven out of ten respondents (70%) were of the opinion that property prices were too high in the region.

UPDATED LIST OF RESIDENTIAL PROPERTIES

See our updated list of residential properties here.

Dubai Land Department committed to property consumer protection

Dubai Land Department (DLD) yesterday signed an escrow account agreement with National Bank of Dubai (NBD).

The decision to establish an escrow framework for property developers further enhances the confidence of investors and end users in the long-term stability of the real estate sector in Dubai. Proactive steps to regulate the real estate industry underlines Dubai's committment to ensure the highest of standards are adhered to while raising the bar of the industry and encouraging both domestic and international investment.


The signing ceremony took place in the offices of DLD, where Juma'a Bin Humaidan, Assistant Director General, Dubai Land Department and Rajesh Thapar, Group Head of Corporate & Institutional Banking, National Bank of Dubai signed the agreement.

Through this agreement, NBD has been appointed as an official escrow account bank by the DLD. The signing appoints NBD as one of the few banks in Dubai to provide escrow accounts designed to protect consumer payments on new and in the pipeline properties in Dubai.

Under the recently promulgated Law No. 8, property developers in Dubai must place project receivables in escrow, or trust, until predetermined development milestones are achieved and independently verified by the escrow account bank. These escrow accounts are regulated by the Dubai Land Department.

NBD's Retail Banking is ranked amongst the top 3 mortgage finance providers in the UAE, offering a suite of mortgage finance solutions and a reputed panel of 14 developers to choose from. This appointment will complement NBD's leading position in the mortgage finance market, adding value both to its customers and its property development partners.

BENEFITS OF DUBAI PROPERTIY INVESTMENTS

There are many benefits of investing in residential or commercial property in Dubai. Dubai is perhaps the most vibrant developing city in the world, a fact recognised by private and institutional investors, as well as the corporate world.

Eight out of the world's largest companies now have major offices in the city, and nearly 400 of the Fortune 500 companies are represented there too.

The Emirates is rich with the proceeds of oil production which has formed the backbone of the economy for many years, but the government has the foresight to know that this will not always be the case and is investing heavily in diversifying its own economy. Indeed it has set targets concerning its GDP (gross domestic produce), and stated that by 2010 only 10% of its GDP will be from the oil industry. Such has been its committment that this target was smashed four years early, in 2006. Growth in Dubai's leisure, tourism and commercial sectors has been so swift that oil represented only 3% of the GDP in 2006.

Some other facts and figures about Dubai:
- 0% income tax, 0% capital gains tax
- 0% corporate tax
- No foreign exchange controls
- No trade barriers or quotas
- Stable, freely convertible currency pegged to the dollar

Some facts and figures about the developers we represent:
- $20bn conglomerate with a diversified range of businesses (including property development)
- Employs over 8000 people across operations in 20 countries
- Its property development business is the Middle East's largest private master developer, and one of UAE's largest private businesses
- 4200 million sq ft of luxury and 9500 customers, across developments in 6 countries
- 16 offices, 68 projects

Some investment and return figures:
Lake Terrace (2003 - now) - 63% annual appreciation, 190% total appreciation
Lake View (2004 - now) - 56% annual appreciation, 111% total appreciation
Lago Vista (2005 - now) - 34.5% annual appreciation
Marina Terrace, launched in 2003, investors have made 228% total appreciation plus 23% rental yields
Waves, launched in 2002, investors have returned 213% appreciation and 19% rental yields

The pros of Residential v's Commercial:
Residential - strong capital growth, good rental yields, taper relief 40% after 10 years
Commercial - stronger capital growth, better rental yields, taper relief 75% after 2 years