Dubai or not to Buy? A Short Assessment of the Dubai Property Market

Never has there been such an ambitious and creative drive to establish a property market as has been witnessed in Dubai over the past three years. Running short on oil reserves,Dubai’s crown prince,Sheikh Mohammed Al Marktoum,set out to turn Dubai into the financial,commercial and tourism capital of the Middle East and in the space of three years he has more than succeeded. The country’s GDP has expanded by 17 per cent over the past year and HSBC Bank estimates that there is .5 billion worth of projects under construction,compared with billion for the rest of the neighboring oil states put together.

The result has been the rise of Dubai as the world’s most glamorous property investment market. Nothing in Dubai is understated. The tiny emirate,that only five years ago was nothing more than a simple fishing village has suddenly become the Manhattan of the Middle East. Following the mantra ‘bigger is better’ Dubai has proudly announced the world’s first seven star hotel,Burj Al Arab and is set to construct the world’s biggest shopping mall,the first underwater hotel and amazingly,the longest indoors ski slope.

Already the annual number of visitors stands at 5 million and is set to rise to 10 million by 2007. The scale of development has been unprecedented with apartment blocks being constructed by the dozen and selling out within days to hordes of zealous investors prepared to queue overnight to bag a bargain in Dubai. The projects being released are some of the most inventive and ambitious the world has seen,with man made islands such as The Palm and more recently The World capitalizing on the attractions of beach front living and redefining the world’s geography in the process.

With real estate as out of the ordinary as this,it’s not difficult to see why Dubai’s property market is attracting such large-scale international interest. There really is nothing like it and it seems everybody who’s anybody will have a piece of Dubai. Dubai’s more exclusive developments are being snapped up the celebrity classes and the world’s elite. Ageing English rocker,Rod Stewart is already the proud owner of Britain [The World's miniature Britain that is!] and villas along the Palm are being bought by sports stars,film stars and anybody with upwards of €1.5 million to spend on a private waterfront retreat.

If so much has been achieved in three years,where is Dubai to go from here? Nakheel,the company behind the extraordinary Palm and The World projects already has its eye,literally,on a new development. Dream City,like the Palm is also a series of man made islands but out sizes the Palm significantly. When finished,Dream City will form the shape of an eye,with the residential element on giant eyelashes extending out into the Persian Gulf. Villas at Dream City start at €425,000 for around 371 sq m (4,000 sq ft) of accommodation. Townhouses start at €200,000,while one and two-bedroom apartments start at €150,000.

For the property investor seeking a lucrative return,a new market is always a risky one and the fear is that the market may collapse soon after it has taken off!. With plenty of anecdotal evidence to suggest that property prices in Dubai are rising by as much as 60% in one year,it’s tempting to rush straight in and grab a piece of the action. But the canny investors will have to consider if it is too much too fast.

The pace of the property market in Dubai makes is a speculators dream. It’s not unheard of for properties to have been transferred up to a dozen times even before the building is complete. Many opportunistic investors are booking 10 to 20 villas in new developments,selling them at significant profits before they have been completed.

Cashing in on this and perhaps in an effort to cool the market,builders are charging a fee of up to 7% each time a property is transferred and lending institutions are trying to keep some control on the market by agreeing to finance only the original sale price. In the secondary market,prices can exceed the original price by 10-70%,depending on the development’s popularity.

All the indications are suggesting that the initial hype is easing and prices are settling. A year and a half ago 900 houses in one development sold out in 7 hours. Many believe that demand will continue to be sustained and prices will continue to rise,though not at the frantic rates they have been rising over the past two years.

In comparison to other new and emerging markets,such as those in Central and Eastern Europe,Dubai appears to be a more attractive investment. Prices in the middle market are comparative to those in Eastern European cities such as Tallinn and Krakow. Unlike these countries Dubai has the sunshine factor and a glamorous edge,which is surely contributing to the high immigration from Europe,the Gulf Region and the Indian subcontinent. Over 100,000 extra people are expected to arrive in Dubai every year. Such large-scale immigration is sure to sustain the property rental markets.

Other property markets are seeing rental yields drop through the floor. Too many investors buying up properties and not enough tenants to rent them! Ireland,Britain and many of the New European capital cities are seeing yields drop to below 3%. In Dubai,rental yields have dropped from a very healthy 8-9% but are now holding firm at 6-7%. The fact that in Dubai rents are paid in advance,sometimes up to one year in advance,is surely a motivating factor for those considering a buy-to-let property in Dubai. On the downside,service charges on new development can be high,anywhere up to £4000 per annum and may be requested by the developer upfront!

Despite the current boom and huge immigration into Dubai cautious investors are raising understandable questions about the security of ownership in the UAE. As yet,no law has been passed to confirm the right of foreigners to own property in any of the projects launched to date. However,the UAE allows individual emirates to issue their own legislation to regulate ownership of real property. While Dubai is committed to encouraging overseas investment,they rule by decree and decisions can be changed overnight the whim of the current ruler. The government have promised that freehold would be granted in the near future. When this happens it is likely to further boost investor confidence in the Dubai property market.

If the property market in Dubai is to develop with any degree of stability,capturing the interest of second homeowners and expats seeking to relocate is essential. If the market continues to be speculator driven,the possibility of a speculative bubble is not unlikely. A revision of property ownership laws for foreign investors should encourage a more stable property investment climate,helping to avoid any crash that might be caused by a quickly exhausted investor base of opportunistic speculators.

Dubai Property Market Prospects

Introduction: Dubai has been one of the biggest success stories in the overseas property industry. The growth in the market,which in the first 11 months of 2007 was reported to be 18.7 per cent in both villas and apartments,has sustained at a high rate for some years now,prompting some investors to buy sight unseen. Commentators are split as to whether this growth can be sustained,but investment in the real estate sector is predicted to provide 35 per cent of Dubai’s GDP over the next five years.

Supply & Demand: One of the biggest contributory factors in the growth of the Dubai property market has been the fact that demand has always managed to outstrip supply. The regular shortfalls in supply are often due to late-running projects and the immense speed of the influx of new workers and residents who all need somewhere to live.

Investment bank EFG-Hermes has reported that the market will be subjected to its biggest shortfall in supply in the second half of 2008,which means prices will hit a peak of sorts this year. After that,the report suggests,the market will begin to swing in the favour of buyers. It says there will be 64,000 units to come onto the market as available for occupation in 2008,and a further 68,000 in 2009.

Tourism: Tourism is the most important industry for the future of Dubai and is also its fastest-growing industry,with over 11 per cent of the GDP coming from holidaymakers,and generating .9 billion of economic activity. The introduction of huge new attractions will fuel the growth in tourist numbers,who will be serviced by the huge new Dubai International Airport.

On the other hand,the number of hotel rooms in the Emirate is set to rise by around 33 per cent per year until 2011,which has led industry watchers to suggest that hotel occupancy rates may fall as low as 60 per cent,compared to the current levels of more than 80 per cent.

Immigration: The lenient tax regime in Dubai has been one of the major attractions for property investors and a large number of businesses,many of which are multinational companies,and some of which have made their headquarters in Dubai. The investment banking sector is predicted to undergo huge growth in Dubai in 2008,adding to the internet and media hubs in the city. This brings with it an influx of people with large salaries who are looking for somewhere to live,and should also employ a proportion of the local population in well-paid positions.

Rentals: Letting property will be one of the most important parts of the future for the Dubai property market. Since November 2005,there has been a government-imposed rental cap at seven per cent of the property value in order to protect the tenant market from potentially astronomical rises in rental costs due to the gap between supply and demand. This cap is currently not due to be renewed at the end of this year,allowing landlords a completely free market. This will push many locals in Dubai to consider buying their own property instead of renting to protect themselves from the potential rises.

The real estate market in Dubai has had its detractors for some time now,people who seem to be keen to see the property buying boom there come crashing to a halt. However,Dubai keeps on fighting back,sticking resolutely to its free,tax-efficient methods. The result has been a highly modern centre of business excellence,leisure activities and innovative development.

Dubai Property Market - An Investor’s Viewpoint

The Dubai Property for sale market is probably one of the most watched and fastest growing property markets in the world,and has been for the past 2-3 years. Real Estate agents and agencies in Dubai are popping up all over the place and developments are rising out of the desert at a pace that puts most cities to shame. Property prices as well have been attractive for investors over this growth period,with many people who decided that buying property in Dubai is a smart move,are experiencing a return on investment (ROI) of sometimes 100% in a matter of two to three years. One shouldn’t expect this amount of growth to continue as the property market in Dubai begins to mature,but there are still an ample amount of attractive developments and financial incentives to make people think long and hard about Investment Property in Dubai. One of the most attractive things about the property market in Dubai are the new property laws that were established in early 2006,that put more stability into the property market,and helped to assure investors of their rights.

The property market in Dubai,however,isn’t for the novice investor and does take a bit of due diligence for those people looking to make some money. One of the most important factors to consider when thinking about buying Dubai Property is whether the developer is reputable. Since the property market has grown so quickly,it has left room for first time developers to attract investors with flashy pictures and 3D models of Dubai Apartments,but without any real experience in property development. Eventually this means a lot of new home owners are moving into their new Dubai property and finding lots of structural faults. That said though,the Dubai Property rent market has almost made this a moot point,as the demand for rental properties in Dubai are such that landlords can rent anything for near record prices and consumers have no alternatives. Hopefully with the passing of the new Dubai Property Law,this will be eased in the future.

Dubai Property For Sale

Where to place and grow your money is not an easy thing to do. As with any other investments,vthe risks can be very high. In a jiffy,all your earnings will be gone if external and internal factors do not go well. However,your investment can rake in super profits with careful planning,lots of hard work,determination and passion.

There are many options to choose from when it comes to where you can invest your money. One lucrative industry however is real estate and surprisingly,Dubai is one of the top destinations for real estate.

While going around Dubai or even when you go online,the “Dubai Property for Sale” sign is already a common sight. This is mainly because Dubai is one of the fast-deeloping business areas. Buildings and establishments are built left and right.

Why is Dubai experiencing such a rising development and why is its real estate industry booming?

Aside from being a developed area,Dubai has been rated by Interpol as one of the safest countries to live in. In addition,Dubai is strategically located in the middle of Europe,Africa,Asia and the rest of the Middle East.

This prestige and image makes Dubai an increasingly famous tourist destination and business development area. As years pass by,Dubai has enjoyed a 16% growth rate in the tourism industry. In 2001,over 3.4 million tourists chose Dubai for their vacation and statistics reveal that this figure will bloat to 6 million in four years,with an estimated 200,000 visitors a day! The tourism industry is developing so fast that supply of hotels,condominiums and other facilities will take up to a decade to catch up with the demand.

A hot Dubai property for sale would have to be condo hotels. Condo hotels allow the owners to own a vacation house in Dubai and yet earn profits when it is not in use. The concept allows owners to have the units rented when unoccupied. With the increasing demand for hotels and lodging in Dubai,condo hotels are being built and sold and these are good investments. To put your mind more at ease,real estate market researches show that investors can very well expect a return of a minimum of 30% on their properties. Investors can expect a rapid turnover in their capital.

Another hot Dubai property for sale is office buildings. With its strategic location and booming economy,commercial buildings are being built especially in the center of the city. Some say that almost 1/3 of the world’s cranes are in Dubai for the construction of new buildings.

The economy of Dubai continues to grow and it is very well on its way to being one of the top commercial districts or business areas in the world. With more and more companies setting up offices in Dubai,rental or sale of office buildings is a very wise investment indeed.

Check the statistics. Check the real estate market. Then you may be convinced that investing in real estate in Dubai may be your ticket to wealth and financial security.

Boom in Dubai Property Investment

Until a few years back,buying freehold property in Dubai was not possible for foreign nationals. Property boom in Dubai only ensued after some considerable changes were made to the emirate’s property laws. Currently,Dubai real estate sector is witnessing a rapid upward trend that’s expected to go even higher with the passage of time. Population of Dubai has grown manifold over the past few years given a sharp and growing increase in the number of expatriates. Both veteran and would-be investors across the globe are eyeing Dubai as the property investment paradise for a long time to come. Property for sale in Dubai has already succeeded in drawing the attention of foreign investors.

Investment in Dubai property,whether it’s buying property in Dubai for permanent relocation or business,or you simply want to cash in on the most popular investment trend in Dubai property i.e. buy-to-let,is very lucrative. The immense development Dubai continues to undergo with massive infrastructure projects reflects the exploding need for space for the country’s multiplying populace. Given these circumstances,the boom in Dubai property market doesn’t seem to slow down at any point in the foreseeable future. These upward trends of Dubai real estate make investment in Dubai property extremely risk-free for foreign nationals and they can choose to invest in Dubai even with their eyes closed.

Nearly all of the buyers of Dubai property find property resale and buy-to-let trend as the most attractive features of property ownership in Dubai. Some recent announcements point towards Dubai’s becoming a tourist hotspot in the near future with more recreation than ever. Newer entertainment and recreation projects are underway which have already drawn a great deal of international attention. The emirate,which is already termed as a playground in the desert,is soon to have more to offer to the world’s recreation seekers. This much international focus means an even stronger property market potential with returns that continue to shoot up.

To the benefit of investors,though not a positive sign for the buyers with no commercial intent,the demand for Dubai property,Dubai apartment,Dubai villas or any other type of property in Dubai by far outstrips the supply. This demand/supply disparity makes Dubai property investment an extremely attractive prospect for the foreign investors. As the experts of Dubai property forecast,the market is lucrative for the investors who already bought property in Dubai. But the market is not so friendly for those seeking rental property right now. If you’re one of those lucky enough people who have already secured property in Dubai,you’re likely to be reaping profits. But if you’re on the lookout for a decent rental accommodation in Dubai,you might have a hard time ahead as the prices are very high and are set to rise higher.

Experts speculate that the population of Dubai will be doubled in 2010. This will turn Dubai into one of the world’s hottest destinations for expatriates and holidaymakers alike and this just bodes so exceptionally well for property investors.