Real estate market information
The contemporary stage of Dubai real estate market development started in 1997, when the public centered around creation of two building companies in Dubai – Emaar Properties and Al Nakheel Properties. During the following year, the development of Dubai Marina and Emirates Living Community Developments projects started.
At first, these projects did not seem attractive enough for investors. But later, in May 2002, the government of Dubai claimed that according to the new legislation, citizens of any country will soon get an opportunity to acquire absolute ownership of residential real estate, unlike earlier existing laws, enabling to owe real estate only on a leasehold basis. The same month, Nakheel company set out to the development of the project of The Palm Jumeirah artificial island, a year later another project - The Palm Jebel Ali - followed, and soon the third island -The Palm Deira - appeared.
The long-awaited law, enabling foreigners to owe estate in definite parts of Dubai (freehold) appeared on 13th March, 2006. This law enabled foreign citizens to acquire real estate in absolute ownership, by means of registration in the Dubai Land Department, as well as sell or lease private property without any restrictions. The list of areas related to freehold, is established by Dubai Sovereign Decree №3 (2006). They include such popular regions as Dubai Marina, Jumeirah Beach Residence, The Palm Jumeirah, Emirates Living, Jumeirah Lakes Towers, Downtown Dubai and others. The decree was a powerful incentive to development in this country and caused high quality real estate buying spree. Actually, resale was efficient and really enabled investors to gain profit from miraculous growth of real estate prices and practice of projects implementation on the stage of building. It is no secret that before the crisis, the real estate market of the Emirates was positively affected by influx of short-term speculative investments from around the world. Money investment in real estate items was aimed at further resale on the building stage rather than at obtaining ready real estate item. Speculators, who took over the real estate market of Dubai in proper time, earned a lot from this. According to the data provided by Colliers Company, the cost of a villa in the primary real estate market of Dubai increased on the average by 226%, while cost of apartments - on the average by 100% in 4 years. The buying spree in the real estate market of Dubai came to an end with coming of the world financial crisis. The real estate market of the Emirates experienced the deepest decline at the end of 2008 – beginning of 2009, which followed a plentiful growth period in 2002–2008. Since September, 2008, the prices in the market have fallen twice on the average. The crisis affected both speed and scale of the Emirates development. As for the real estate market, as a result of the crisis, speculators almost completely abandoned the market. In the course of the 4 recent years, the real estate market has got over the shock, and its participants, having realized the new reality, changed their approach in order to work in new conditions. Speculators, having left the real estate market of Dubai, created good work conditions for long-term investors. Legal framework was renewed and it is aimed at governing the relationship between landlords and the tenants, builders and investors. Nowadays, governing of the real estate market of Dubai is carried out by an especially created agency – Real Estate Regulatory Agency (RERA). This authority is in charge of control over transactions of leasing, buying and selling residential and commercial real estate. RERA initiates laws, aimed at investors’ rights defense and requirement strengthening concerning developers and stockbrokers. But it is more important that by present moment the market stabilized around lower price levels, which is undoubtedly attractive for potential investors. Almost 4 years later after the global financial crisis, reinstatement process started in the real estate market of the UAE. Due to considered project financing, as well as restructuring of the biggest building companies, reconsideration of term of projects delivery and postponement of debt payment term, real estate sector of the country managed to cope with the complicated situation. Investors have returned to the real estate market of the UAE, interested, first of all, in acquisition of high quality housing in prestigious areas, promising in terms of profit earning. Constant growth of demand for real estate in Dubai facilitates growth of its price, providing high profitability of investments. The Global Property Guide resource noted in its recent independent review that the residential real estate market of Dubai in 2012 achieved most magnificent success in comparison with other world real estate markets. The general number of real estate related transactions in Dubai has increased by 18%. Considering current investors’ interest in the residential and commercial real estate market of Dubai and intention of the government of Dubai to create long-term economic prospects, it is obvious that short-term, medium-term and long-term prospects of the real estate market of Dubai are going to stay unbelievably stable. There are a great number of other factors, which can increase the level of investment in real estate of Dubai. Unchangeable intention of the government to make Dubai one of the best world cities can make investors confident, while foreigners’ interest in employment, business and rest in Dubai shows that investors are inside the growing market, where they can lease or sell their investments. The fact that the government of Dubai has a share in all the principal building companies in the Emirate can bring confidence to investors. Thus they are interested in supporting real estate sector as attractive, developing and salable. Another government merit is effective approach to development of Dubai and, consequently, immense attractiveness of Dubai as an opportunity for investment and lifestyle. The real estate market of Dubai will make a considerable step towards returning to previous market positions in the following few years. International elite real estate agency Chesterton International, being a repeated holder of international awards, considered as the trustworthy leader for investors, has compiled a forecast based on analysis of economic situation in the UAE. Robin Tech, the agency director, predicts that the real estate market of the UAE will grow by at least 5% each year until 2015. In the ten-year development master-plan “Dubai-2020”, approved by the Executive Council of Dubai, the plans for building of new ambitious infrastructure projects, related to the residential, commercial and industrial real estate sector of the Emirate of Dubai were considered. As believed by some analysts, at present it is a proper moment for investment for the nearest 5 years, as good prices have established in the real estate market of Dubai.
The American bank Merrill Lynch considers that in the nearest ten years the real estate market of Dubai will considerably benefit due to growth of the Emirate population and creation of new workplaces. Dubai economy is rather peculiar as more than 90% people working there are foreign specialists. The results of life level research, conducted by international league of purchasers abroad (NatWest International), indicate that immigrants have a unique opportunity of earning in Dubai on the average 40% more than their fellow citizens, working in their native country. This, as well as the fact that Dubai has already started new projects development, causes considerable real estate demand. By 2025 it is planned to build about 3 000 more skyscrapers for residential and office areas in Dubai. Acquisition of residential and commercial real estate items in a dynamically developing country enables to invest with guaranteed profitability level.
According to analysts’ data, at least in the course of the nearest 10 years, the demand for high quality residential and commercial real estate of Dubai will exceed the supply, thus at present the real estate market of Dubai is one of the most attractive ones for investments.
Written by Strategic Technology Solutions