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Soon after its property market was opened to foreign investors in 2002, the UAE emirate of Dubai has witnessed a remarkable growth in its real estate, especially residential sector. |
More than 400 property developments have received the green signal from the Dubai Land Department so far; majority of the projects that were launched in the early 2000s have been completed and most of the properties within them are now either occupied or handed over to owners. Prominent among the finished projects are Jumeirah Islands, Arabian Ranches, The Springs, The Meadows, The Lakes, The Greens, International City and Dubai Marina.
Subsequently, the primary property market in Dubai is weathering strong buyer interest. However, surprisingly, in spite of the deluge of new properties, the retail/resale/secondary property sector has recorded a steady growth rate. According to the market studies by our experts, villas in Dubai typically register more than 70% capital appreciation within just 2 - 3 years; other properties are reselling at an amazing 40 – 55% more than the original cost. Also premiums are at an all-time high at developments like The Greens and International City (up to 200%), popular among the professional classes in Dubai.
Secondary sales in Dubai are particularly strong in areas like International City, Discovery Gardens and The Greens, developments noted for their comfortable and moderately priced housing amenities – two prominent yardsticks for property purchases. Thus, it may be safely surmised that investors who entered the real estate market early have made massive profits out of their investments. The property market in the UAE continues to thrive, with an estimate, in Dubai alone, of 69,000 units to be delivered in 2007 and some 139,000 units in 2008.
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A hotspot in terms of realty re-sales is Palm Jumeirah, set for completion in late 2007/early 2008. Nakheel, the developer of the Palm isles has confirmed that its phase I villas & apartments have seen dramatic appreciation, with some villas sold off-plan for about $1.25m now going for $3.25m, while seafront Shoreline Apartments have increased in value by 120%. |
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The residential property sector – both primary and secondary - are expected to hold strong because of the population of the UAE is demographically young, thereby generating heavy demand for housing units. In addition, there is a large and continuous influx of expatriates attracted by the current economic boom, with strong job growth and remuneration. Population in the UAE has been growing steadily in recent years at a compound annual rate of 7.4%.
Another factor that has sustained the secondary market in Dubai is the high rental yields. In the global search for investment returns the pricing of major asset classes has increased to reflect much lower interest rate levels. Interest rates are now on the way back up again but this has so far had little impact on asset pricing. So the search is still on for assets with a good yield like Dubai property.
The retail sales of commercial space in Dubai are also highly impressive. Dubai currently has only an estimated 24 million square of commercial area. Owing to its emergence as a corporate hub, there is a massive demand for commercial property – office and retail – in Dubai that outpaces supply; this is evident in the abnormally high rental yields that now average 27%, a huge premium to the global average.
Resale prices of commercial properties in Dubai are determined largely by their location, quality and developer. Most of the commercial space additions are expected to hit the market in 2008 & 2009 with major deliveries scheduled at Jumeirah Lake Towers, Business Bay and Dubai International Financial Centre (DIFC).
By: Mini Sreenarayanan
GOWEALTHY.COM©2006
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