Dubai Property prices slated to rise by 20-25%
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Dubai Property prices slated to rise by 20-25% in 2008 |
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Property
prices of the Gulf Arab countries have had a northward trajectory since
the past few years. This appreciation is more than the demand-supply
theory. Apart from the exponential increase in oil prices which has
touched $ 100 a barrel recently, robust growth with good planning has
triggered economic growth in the region. Dubai, the region's hub, has
capped 2008 annual rentals at 5%, which is narrower than last year's 7%
cap and the 15% ceiling for 2006. Jones Lang LaSalle expects a supply
surplus in Dubai between 2010 and 2012. This adjusts the global real
estate investor's previous forecast that supply would surpass demand
between 2007 and 2009.
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( Source ; Ministry of Economy- Dubai )
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According to many analysts, real estate prices and property rentals in the Gulf Arab region, especially Dubai are most likely to rise up to 20% in 2008. This increase is seen as a result of higher labor and construction costs coupled delivery delays. |
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"With
the delays in delivery, the spectre of huge supply continues to be
delayed and you see greater demand... there will also be an increase in
labour and construction costs and land prices," said Blair Hagkull,
regional managing director at Jones Lang LaSalle in Dubai.
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Of
57,000 residential units expected in Dubai in 2007, less than 20% were
delivered by September, Cairo-based investment bank EFG-Hermes said in
a report that month. It said then it expected a rise of 5-10% in
property prices in 2008.
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Dubai faces shortage of office spaces in 2008
Summing
up, we have an expected demand latency of 45% space than is currently
available in the market (app. 1.5 million square meters of cuurent
availability). We are then facing a situation with an immediate
requirement for 675,000 square meters of office space, which requires some time to be ready. Jones Lang LaSalle Research indicates that more than 90% of the buildings announced and under-construction in Dubai are being built for strata sale. Developers in the market are currently playing short and to the tastes of speculators by offering beautiful designs and smaller floor plates. Dubai intends to supplement the growing demand of office space with commercial developments stretching from Business Bay to DIFC through Jumeira Lake Towers and TECOM 2, and onwards to the Jebel Ali Free Zone and Jumeira South. If the Middle East real estate market is on an upsurge, its UK counterpart is beginning to show slump. |
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UK property index shows decline
Capital
values in 2007 are collectively thought to have slumped 10%. The pinch
experienced by investors has been reflected in the depreciating share
prices of leading UK property companies such as British Land and Land
Securities, which have dropped 45% and 36% last year. The quarterly net asset value per share of British property firm Great Portland has fallen 6.5%. The company says the turbulence in the investment property market is set to continue. "Investment market turbulence is forecast to continue, particularly for poorly located, secondary properties and rental growth rates are expected to moderate," it said in a statement. However the overall rental income in 2007 has climbed 5%, which means total revenue from property last year – capital value and rental income – has fallen by 5%. |
The
growing importance of Dubai in global economy is augmented by the fact
that multinationals, high-value businesses and financial institutions
are seeking to locate here, thereby creating a massive demand for
office spaces. Currently, demand by far exceeds supply. Some analysts
estimate demand latency from exisitng occupants upto 20% from existing
occupiers in Dubai and as much as 25% by those yet to establish
physical presence but are already represented in the Emirate.
The
UK annual property index by consultants IPD is widely expected to a
slump of 15% in the capital value of UK property in 2007. In June the
UK capital values peaked, but afterwards went down, including a 4% to
5% fall in December, revealing that the second half of 2007 was one of
the worst in recent times.
