Dubai property sector remains positive despite global credit crunch

Dubai property sector remains positive despite global credit crunch

As international markets grapple with the ongoing global credit crunch, Dubai property sector continues to expand. Realty prices across the emirate have shown an appreciable rise in the last 4-5 years and going by the current trends, we expect the local market to sustain its momentum for the next 3-4 years. The Gowealthy Research Team takes a closer look at the various freehold segments in the emirate, analyzing how prices of residential units have fared since 2005.

This week, we focus on International City, a self-contained community of 29,101 apartments and retail units off the Emirates Road in Dubai. Ever since the first building was completed in July 2004, International City has become a retreat of choice among the expatriates of Dubai, mainly due to its cosmopolitan yet moderately priced properties. However, this master development is also a safe investment haven as can be surmised from the figures below.

Price Index

Launched in July 2002, International City comprises 5 main districts: Residential District; Central District; Dragon Mart Complex; Lake District and The Forbidden District. This master development is located in the Al Warsan area of Dubai, 12 km from Dubai International Airport at the intersection of Al Aweer Road, Academic Road and Emirates Road. It is a city in its own right, with 23,847 studio, 1 and 2 bedroom apartments, in addition to 5,254 retail shops. A majority of units within International City target the middle-income group. Our analysis reveals that in 2005, studio prices at the master development averaged USD 1174 per square meter and as of Oct 2008, they hover around USD 2384 per square meter. This is an increase of more than 110% in 4 years. Similarly, for 1 bedroom apartments, prices averaged USD 1105 per square meter in 2005; they have touched USD 2443 per square meter in 2008. (Please note that rates can go up considerably if the title deeds are already issued by Dubai Land Department as then the transfer would be much easier and can be done directly from the Land Department).

(*Compiled by Gowealthy Research Team. Sources include in-house data, newspapers and online classifieds. The prices quoted are average rates and apply to various clusters within International City.)

Our study records a steep rise in the prices after 2007. This is significant because all the clusters, with the exception of the recently launched 'Emirates' segment, were completed and delivered by 2007.  

Demand for completed residential properties is at an all time high in Dubai, given its current industrial growth and the consequent population explosion. Requirement will continue to mount as long as the demand-supply disparity prevails in the Dubai realty market. In spite of the substantial construction activity in Dubai, a dearth of mid-level housing still persists in the emirate. This is augmented by Dubai's latest directive to residents and owners of illegal constructions. The Dubai Municipality has called upon occupants and landlords to vacate illegal premises in accordance with the Local Order No. 3 of 1999, pertaining to organizing building activities in Dubai. In addition, the Municipality has launched a campaign to regulate labor, bachelor and multi-family accommodation in residential areas. These measures will definitely escalate demand for housing across the emirate, igniting rents and prices.

Unlike the western markets, the Gulf peninsula led by Dubai is experiencing an economic boom that is driven largely by an increase in national income from soaring oil revenues. The high rate of per capita affluence along with the modernization in legislations and laws are key factors in attracting businesses which also facilitates further investments into the market.

(Watch this space next week, as we compare the prices of properties within yet another freehold community in Dubai)