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Steady demand to keep Dubai’s property market buoyant until at least 2020

Dubai’s prime residential market is expected to remain buoyant until at least 2020, according to Core, UAE associate of Savills.

The “H1 Dubai Investment Outlook” report reveals the prime residential market will benefit from limited availability in the few established areas and the steady demand, aided by the growing pool of regional and global investors looking to re-enter the bottoming market.

Company CEO, David Godchaux, says: “The relative resilience of prices in most of the established ultra-prime areas is an interesting aspect coming to the fore, underpinned by limited new supply and continued demand from UHNWI investors wanting to own ultra-prime properties in Dubai’s locations such as villas in Palm Jumeirah and Emirates Hills, along with a few luxury apartments in the Downtown and Marina districts and the new Jumeirah freehold developments like City Walk.

“The trend is stemmed by the long-term investment horizons and status factors of a majority of owners of prime residential real estate in Dubai – contrasting with the many investors-speculators of pre-2008.”

A number of new residential projects, driven by the “affordable housing” theme have come to the market in the last few quarters, with attractive yields appealing to investors and real estate funds looking to diversify their real estate portfolio.

Godchaux adds: “While we do not believe strongly in affordable housing as a compelling investment in the long-term in Dubai in comparison to other segments of the market, we still believe there are good opportunities to seize given that most potential customers in this segment are still unable to shift to ownership due to current mortgage restrictions keeping the yields at artificially high levels.”


British buyers pile into Dubai as Property Prices take a breather in 2015

Property prices so far in 2015 have begun to cool in Dubai after witnessing steep rises for the last few years. However, this has not deterred British investors as they continue to pile into Dubai’s property market in search of a bargain.

Memories of the emirate’s real estate bubble bursting in 2009, exposing its debt-laden economy, have started to fade with UK buyers pumping over £2bn into the Emirate in 2014.

British nationals were the second most significant property investor behind Indians, who upped their levels of investment by 24pc to £2.5bn, and just ahead of Pakistani buyers who spent 50pc more at £900m.

But despite a slew of forthcoming high-profile projects such as a new golf course from US tycoon Donald Trump, and a pipeline of luxury developments, the rate of growth is slowing.

To cool the market, recently the Federal Government imposed stricter borrowing rules and doubled property registration fees to allay the fears expressed by the International Monetary Fund of a potential Dubai property bubble, dampening growth.

“Certainly, growth on the magnitude recorded last 2 years was unsustainable and always in danger of petering out,” said Faisal Durrani, an analyst at Cluttons.

Oversupply is also cooling the market according to the property group, who sell luxury homes such as a £4m four-bedroom villa on the world’s largest man-made island, off-Dubai, Palm Jumeirah.

“With signs of reduced sales activity – particularly in the secondary villa market – it is likely that asking prices in this sector will decline further in the coming months,” Alan Roberston, chief executive of the Middle East practice at JLL.

HSBC has ruled out the possibility of another property crash, as the market is sustainable and headed for healthy growth. HSBC Global Research said that there will a supply of 90,000 new units in Dubai by 2018, however, it will not result in oversupply as the new housing units will be absorbed by the growing population.

“We believe that we have not yet reached the peak of the cycle, and that the market can continue to absorb the expected supply additions over the next few years, even at a population growth rate below 5 per cent. The Dubai population would need to increase by 300,000 people by 2018 in order to absorb all of the new supply,” the bank said.


UAE housing market continues higher in 2014

2013 has no doubt been a big year for the UAE property market. Dubai was recently named the world’s strongest housing market in 2013 given the city’s status as a safe haven with improved consumer and investor confidence. Home prices have been recorded at the highest levels since the downturn and the market has also gained a more favourable reputation for tighter regulation, given the spate of laws we’ve seen come into effect this year.

As some of you may already know, the government has enforced a new rental decree which allows for rents to be increased by five per cent if they are 11 per cent below the market rate for the area rather than 26 per cent, as determined by RERA’s rental index. The law will be applicable to private and public sector owned properties in Dubai, as well as those within the free zones.

With fears of a lurking rental bubble especially post the Expo 2020 win, this latest announcement can be seen as yet another initiative by the government to ensure that the momentum within the real estate sector is managed well and that landlords do not arbitrarily hike rents on renewals on any property within the city. This also makes sense given the fact that the many businesses and professionals expected to come in to the country in the years leading to the Expo could lead to heightened demand for properties, causing landlords to demand higher rents.

Reactions to the new rental policy, as expected, have been mixed. Whilst some residents consider this a better move than the recent total removal of the rent cap in Abu Dhabi, others worry that a rise in rents too quickly could drive the market into bubble territory. However, we can also look at the situation from the viewpoint of the landlord. For one, since 2008/2009, tenants in Dubai have enjoyed the benefits of relatively lower rents. Hence, landlords could argue that given the rebounding market, they should be able to pick up better returns. This may also work in the favour of tenants, as more landlords content with rental returns in the long run would mean fewer reasons for them to make a quick buck by evicting tenants. Also, given the huge influx of investors to Dubai in view of Expo 2020, it makes sense to realign and adjust the rental index across private and public sector and free zone owned properties in Dubai.

Amidst all this debate, there are a couple of lessons we need to take away. Whilst landlords should understand their responsibilities and abide by the law, tenants should make sure they understand the Dubai Rent Index that provides average rentals for all key neighbourhoods and use the online Rental Increase Calculator to know the increase their landlords are eligible for.

The house price boom that preceded the downturn was so remarkable that to most people there seemed only one way for prices to go up. 2013 has been a year of change and growth that many hope will carry into the new year. Whilst the housing market has indeed made great strides showing a marked increase in sales and investor interest and setting the stage for thriving demand with the Expo 2020 win, expecting the price appreciation to continue with the same fervour next year seems to us once again a self-reinforcing cycle of popular belief that prices can only go higher. This, of course, is not realistic and a sign of misplaced optimism, as for the housing market stable rather than accelerated growth is what will make it robust and keep the heat out of housing.

Ultimately, supply and demand market dynamics will override other variables. With market and economic fundamentals remaining strong, there is little reason at this stage to question that 2014 will also be a strong year for the real estate market in the UAE.


Dubai: World's best performing Property Market in 2013

Dubai maintained its spot as the world's best performer in Global Property Guide's latest report. House prices in Dubai soared by 17.99% during the year to Q2 2013.

Dubai started to recover in Q2 2012, after a severe crisis during which house prices fell by 53% between Q3 2008 and Q3 2011, due to the global financial and economic meltdown. The strength of Dubai's housing market has supported by the emirate's robust economic growth, bolstered by several other factors, including the availability of finance, the city's status as a safe haven, an exchange rate pegged to the US Dollar, and improved consumer and investor confidence.

However, the continuous double-digit rise in house prices in Dubai is now raising concern of a new bubble forming. "It's too early to speak of a bubble now, but if prices increase at this pace, over time there's certainly a risk that there would be a new bubble forming" said Harald Finger of the International Monetary Fund (IMF). The IMF expects the UAE economy to expand by 3.4% in 2013.

So Why is Dubai Booming again?

One of the major factors is Population Growth. The Dubai authorities predict that Dubai's population will increase by over 10 per cent a year, reaching over 4 million by 2020. Over the next 4 years alone, the population is expected to Increase by 50%.

Dubai Population
1975 - 183,000
1985 - 370,800
1995 - 674,000
2005 - 1,204,000
2010 - 1,780,000
2013 - 2,106,000
2017 Est - 3,275,000
2020 Est - 4,292,000

Dubai and Abu Dhabi could be forced to revise population projections and increase investment in infrastructure, as projected population numbers for projects planned by developers are outstripping expectations.

Other reasons for the boom include Increase in Tourism - Dubai is becoming desirable as a safe holiday destination for many people all over the world. Tourism is further helped by the fact that Dubai has re-established itself as a worldwide hub. Many visitors travelling from East to West or vice versa now use Dubai as the stopping point and quite often spending a few days to a few weeks in Dubai. This effect is predicted to become even more prominent.

The current Dubai International Airport is destined to become the World’s busiest Airport by 2015 beating London Heathrow and reaching 75 million passengers per year. The new Dubai World Central Airport at the other end of Dubai is still under construction and will have six operational runways and double the capacity. The existing airport will also remain operational when the new one comes fully on-line.

Also Return in Confidence - The financial crisis in 2008 had a very negative effect on confidence with 60% drop in property prices. Now with the economy doing well (GDP 6%) and the above factors, there is a return in confidence which has resulted in property prices going up and these are now rising every month. Nobody can be certain about the levels of property growth, but most analysts believe that prices on ‘ready’ properties will rise rapidly and exceed the 2008 peak levels before stabilizing and growing at a slower rate.


Dubai Among World's Best for Real Estate Price Growth

Dubai was the only Middle East city on the list and ranked higher than traditionally popular real estate markets like Monaco, London, Hong Kong and Moscow.

Dubai was one of the top five best performing real estate markets in the world last year, according to a the latest report from international consultants Knight Frank. According to the latest Knight Frank Prime Global Cities Index, the emirate ranked 4th on the list of 29 global cities studied. Prices rose 18.3 percent in the twelve months between March 2012 and March 2013, with prices up 5.4 percent in the last three months, it claimed.

“A typical prime property is now worth 21.3 percent more than it was in Q2 2009 when Knight Frank’s Prime Global Cities Index hit its post-Lehman low,” said Kate Everett-Allen, International Residential Research at Knight Frank.

However, the overview showed a marked difference in performance across the globe. Cities in Asia, North America and the Middle East continue to dominate the top half of the results table while seven of the bottom ten rankings are occupied by European cities.

Dubai was one of the hardest hit markets during the financial downturn, with prices dipping up to 60 percent from their peak in 2008, but local analysts have warned that the city’s resurgent housing market needs to be monitored more carefully as residents start to feel the effects of a rising cost of living.

In its latest report, property consultants CBRE argued that if new supply and further regulations are not added to the market, Dubai’s “competitiveness as a burgeoning global business environment” could be affected.

The firm also warned that the return to the market of speculator activity, and the consequent rise in prices, could be “a little ahead of reality”.

“The residential sector has maintained positive momentum amidst solid market fundamentals and steady economic growth,” the company said in its latest research note. “However, there is a modicum of concern that the recent escalation of sales and leasing rates could actually be a little ahead of reality."

CBRE pointed out that while sales volumes had grown by 30 percent in the first quarter year-on-year, figures had actually dropped since the last quarter of 2012. Transactions dropped by 24 percent quarter-on-quarter, while the overall value of properties sold fell by 17 percent.

The firm said that 60 percent of all sales had taken place in well-established locations, such as the Marina, Emirates Hills, the Palm Jumeirah and Downtown Dubai. Rents of two-bedroom units in these locations rose by 27 percent year-on-year.

The highest rise was seen in the Greens, where rents rose by 40 percent in the last twelve months.
Average villa prices rose by almost 5 percent in the first quarter, with smaller villas registering much higher growth.

In the office market, which has been oversupplied ever since the financial crisis rocked Dubai in 2009, CBRE reported “growing demand” for commercial space. It said that prime rents in the CBD had risen by 4 percent on quarter-on-quarter, while there was evidence of rental growth for selected areas in Jumeirah Lakes Towers, Business Bay and TECOM.

Dubai has seen a slew of new megaprojects announced in recent months, including the giant Mohammed Bin Rashid (MBR) City, a mixed-use development located in Dubailand. It will include the world's biggest shopping mall, more than 100 hotels, a Universal Studios franchise and a public park larger than Hyde Park.

Click here to see the world's best real estate investment cities 2013

Source: Arabian Business, May 2013


Dubai Passenger Traffic to match Heathrow by end of 2013

An Emirates Airline Airbus A380 sits on the tarmac outside terminal 3 at concourse A, the new A380 terminal at Dubai International Airport, on 25th Feb 2013.

Dubai Airports said it’s in advanced talks with several airlines about bringing passenger traffic into the second airport as it begins the transition from the existing hub that will run out of space within the decade.

The airport authority may make an announcement on operators very soon, said Chief Executive Officer Paul Griffiths. Dubai World Central, as the new airport closer to the center of the city is called, will have room for 80 million passengers by 2027 and eventually grow to 160 million, more than double capacity at London Heathrow, Europe's busiest hub.

Dubai’s rulers have sought to exploit the Sheikdom’s geographic position at the heart of intercontinental flight paths to develop an airport that can help local carrier Emirates win a higher share of long-haul traffic. Since Griffiths joined from London’s Gatwick Airport in 2007, Dubai International airport has almost doubled traffic to 57.7 million passengers, putting it on a path to match Heathrow by the end of 2013.

“When I started, Sheikh Ahmed gave me the objective to make sure nothing constrained the aviation industry,” Griffiths said in an interview in Berlin on March 5. “It’s nice to have one clear objective.”

A third of the world’s population lives within three hours flying distance from Dubai, and two thirds lives within eight hours, according to Griffiths, making the location optimally placed to serve global traffic intersections.

Dedicated Concourse
Emirates and all other passenger airlines operating in Dubai now fly in and out of Dubai International airport. The airport boasts three terminals and is undergoing a $7.8 billion expansion plan that will boost capacity to 90 million passengers by 2018. Part of that project involved the construction of an area specially dedicated to the Airbus A380, the world’s largest passenger aircraft.

The A380 concourse, the world’s first facility built solely for the superjumbo, opened Jan. 2 and exclusively serves the doubledecker jets operated by Emirates, with the different travel classes segregated from the time they access the concourse. It may later take A380s operated by Qantas Airways, which has a partnership with Emirates, and may also take other big planes flown by Emirates, including Boeing 777s, Griffiths said.

Until now, the new airport has handled only freight operators. Its one runway will eventually expand to five parallel lines, and Dubai will add concourses to the point where it expects to have 120 aircraft movements an hour by about 2025. By comparison, Gatwick, Griffith’s alma mater, has less than half the amount of movements.

Eventual Switch
Emirates, whose CEO is Sheikh Ahmed bin Saeed Al Maktoum, isn’t going to switch over to the new airport before it reaches 80 million in passenger capacity because the airline’s mode is based on an integrated hub that lets customers connect to any other flight within 75 minutes, Griffiths said. Once the traffic has moved, the authorities will seek another use for the old facility, Griffiths said, without elaborating.

Even as the government-owned airport authority begins to move passenger airliners into the new facility, located 22 miles from the other site, Emirates will remain at Dubai International until it reaches saturation point, when it will switch over, Griffiths said.

The Dubai government is still weighing whether it makes more sense to accelerate a move from Dubai International to Dubai World, or to let it happen more slowly, Griffiths said.

“We’re looking at alternatives now, and in a few months we’ll have a clear position,” he said. “One plan is to build up quickly, within a 12-year frame. The other calls for longer, incremental growth over 15 years.”

Several Equations
Either way, operating both hubs simultaneously for some time poses its challenges, said Griffiths, whose previous career stints include work for Richard Branson’s Virgin Atlantic.

“There are various equations,” he said. “Can you operate two airports, one of 160 million, one of 100 million passengers, within 22 miles and cope with these buzzing bees in the sky?”

Among the other challenges is devising a unified system to help manage the increased number of flights. Air traffic control in the Gulf region is still a patchwork of centers under individual, sovereign nations, requiring hand-offs for pilots as they pass from one air space to another. Still, going back to the low-growth pace of western European aviation is not an option, Griffiths said.

“In the developed western world, everything is well organized, everything is thought through and there are regulations for everything,” Griffiths said. “The unfortunate thing is, in mature societies, there are far more things you can’t do than you can do. In Dubai, I was allowed to paint the canvas with any brush and any color!”

Source: Bloomberg, 7th March 2013.

Dubai's population increases by 5% in 2012

- A daily occurrence of crowds gathering at the Dubai Mall to watch the spectacular fountain show

The population of Dubai increased in 2012 to reach 2.1 million, growing 5% more in 2012 and continuing to be one of the fastest growing cities in the world.

Juma Al Hosani, Director of Population and Social Statistics at the Dubai Statistics Centre, told the news provider that this growth is typical. He stated: “We used to have 7% but after the economic crisis we reduced to a 5% growth rate.”

The findings showed the neighbourhood where most people lived was Muhaisnah 2, containing 8% of Dubai’s overall population, despite covering just 5.5 sq km. The areas with the highest number of residents were all well-known labour and industrial locations. Collectively, they totalled 17.5% of Dubai’s whole population.

According to the Dubai Statistics Centre, 1,041,705 visitors came to Dubai on a daily basis in 2012, which is an increase of 2% from 2011 figures.

The number of people living in Dubai is constantly changing, so much so that the centre has a population clock on its website which estimates how populous the Emirate is on a daily, weekly and monthly basis. These figures are based on surveys, reports and censuses; currently, the clock reports that 2,120,658 people live in Dubai.

Dubai Rents Advance on Population Growth, CBRE Says

Residential rents in Dubai rose 17 percent on average amid population growth and limited supply in certain areas, according to CBRE Group Inc. “Dubai is seeing higher rental growth this year due to a sustained period of population growth, positive economic performance, increased occupier demand and limited availability of quality units in the most desirable locations,” Matthew Green, head of United Arab Emirates’ research at CBRE Middle East, wrote in the latest report.

Dubai, which witnessed one of the world’s worst property crashes with 65 percent drop in home values from its 2008 peak, is returning to large projects which dominated the market. The Persian Gulf business hub, which is home to the world’s tallest tower and man-made islands, recently announced plans to develop a new district with the world’s largest mall, 100 hotels and gardens larger than London’s Hyde Park. Just days after the Mohammad Bin Rashid City was announced, the sheikhdom said it would build five theme parks for $2.7 billion.

About 36,000 apartments and single-family homes maybe completed from 2013 to 2015 provided construction delays are minimal, according to CBRE.

The majority of residential supply is expected from locations such as Dubailand, while about 26 percent of it will be in Motor City, Dubai Sports City, Liwan and Dubailand Residences, it said.

“With supply levels becoming increasingly tight in popular community areas, further product launches are anticipated during 2013,” according to Green. Although investor confidence is growing, “the main focus for investors remains completed assets in established locations,” he wrote.

Mega Dubai Developments for 2013

- Taj Arabia: Replica of the Taj Mahal...only 4 times larger!

Dubai is Back
A replica of the Taj Mahal four times larger than the original. An underwater hotel. A 5 sq km complex of homes linked by canals. The world’s biggest mall (again). A crocodile park. If you wanted any proof that Dubai’s economy is back on track following the financial meltdown that shook the world in 2008, one need only look at the list of ambitious new developments announced over the past 12 months. Many of the proposals have had seasoned expats whispering ‘it’s like 2006 all over again’, with a look of both excitement and desperation in their eyes.

There’s no denying that the new developments – sublime, ridiculous, beautiful, thrilling and garish as they each might be – will be a marvel to watch evolve in front of our eyes. But for those who lived through the sky-high property prices of Dubai’s 2006-2008 boom (a time when general inflation alone soared to 10.8 percent by 2008), a sense of anxiety may be somewhat justified. With this recent recovered economic confidence, Dubai has also seen property and rental prices soar – most of the sales and letting firms have reported that property prices in prime areas have soared by as much as 25 percent over the past 12 months, with rental prices rising by up to 15 percent. ‘When 2008 hit, I thought it would take six years to recover,’ says Priyesh Patel, a sales director with real estate firm Aston Pearl. ‘Yet it only took three years.’

So why such a swift bounceback? A key factor in Dubai’s resurgence is confidence. Where investors were panicking a few years ago, the string of recently announced new developments act as a global symbol that Dubai has defiantly recovered its mojo. ‘The announcements have started a belief that the city is back on track after three years of doom and gloom,’ says Mario Volpi, head of sales and leasing at property consultant Cluttons.

Dubai has also seen a recent surge in population, creating fresh demand for a limited supply of property. While some residents chose to hastily pack up and leave when the crisis hit, employers have been steadily recruiting in recent years, with Dubai’s population now having soared to an estimated 2.1 million for the first time. Meanwhile, the political instability in neighbouring countries and the fallout from the Arab Spring has been credited with making Dubai increasingly attractive to investors based in the Gulf. ‘There’s a lot of money coming in from Iran, Syria and Egypt, because [investors are] worried about keeping money in the banks,’ adds Patel.

By Rob Garratt, Time Out Dubai

View the Mega Dubai Developments for 2013

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