Vol:05 Apr/08
Dubai property market foresees stunning growth in 2008/09
Dubai property market foresees stunning growth in 2008/09
One
of the most active real estate markets in the Middle East and North
Africa (MENA) region, Dubai is witnessing a dramatic increase in demand
for residential properties, especially in the high-end sector like
villas. As one of the lowest taxed economies, with zero corporate,
income and sales taxes, the UAE is an investor haven. The World
Economic Forum enlists the United Arab Emirates, particularly Dubai as
one of the top 15 global destinations for foreign direct investment
(FDI).The massive real estate and construction upsurge in Dubai and the UAE could be ascribed to the 2002 decree by Sheikh Mohammad bin Rashid Al Maktoum, Ruler of Dubai that effectually allowed foreigners (non-GCC expatriates) to own freehold property in select areas in the emirate, collectively called ‘New Dubai’. The royal proclamation was followed by Law No. 7 (commonly termed the Freehold Property Law of Dubai) of March 14, 2006 that legalized foreign ownership of properties in Dubai. Majority of the real estate developments in the UAE were initiated in the last three years, which means there are still quite a few projects to be delivered in the medium term. Meanwhile as the UAE and Dubai continue to develop, there is a dearth of low-income housing. This is set to continue for some years, as land prices have gone up drastically making it impossible for private developers to enter this area, thereby fuelling demand and real estate prices in the region. Key drivers of Dubai property market We believe the soaring growth rate of the UAE real estate market is sustained by population explosion, a youth-oriented age profile, a huge influx of expatriates, higher liquidity levels in the region and finally, pro-active government policies. The UAE’s nominal Gross Domestic Product (GDP) rose by 17.7% in 2004 to Dh378.8 billion (US$103.2 billion), according to the Ministry of Planning estimates. Real GDP grew by 7.4% to Dh323.6 billion, the growth being one of the highest in the world. As a result of record high oil prices, liquidity levels in the region have gone up considerably. Accordingly incomes have risen, extending the boom to the local property industry. 
Population growth has contributed immensely to the expansion of the Dubai real estate sector. The country boasts one of the highest population rates in the world with an annual growth of over 7% in the last 5 years. In 2005, Dubai had 1.13 million residents, and by 2006 it reached 1.422 million. The official figures for 2007 have not been released yet; however it is believed that current population of Dubai is around 1.7 million. This means some 27,000 people enter the emirate every month. And a sizeable percentage among them requires housing. In the current scenario of an economic boom, with more employment opportunities we expect population growth to continue in the short-term, especially due to the further increase in the influx of expatriates into the country. The growing demand for lands and properties in Dubai is reflected in the local property sector.  Graph 01  Graph 02  Graph 03  Graph 04  Graph 05  Graph 06 If the total value of land sales in Dubai was US$ 1.2 billion in 2002, in 2007 it touched double digit figures of US$ 12.9 billion. This astonishing rise in capital inflow highlights the level of investor interest in Dubai property market and also its potential. Land deals worth Dh22.9 billion (US$ 6.23 billion)were carried out in Dubai during 2006 while 1128 buildings were completed at a cost of Dh5.579 billion (US$ 1.519 billion), out of which 207 investment buildings, 710 residential buildings, and 211 buildings were meant for recreational, service and industrial purposes. |
