Steady growth potential for Dubai real estate
Dubai - Dubai’s multifaceted real estate market is expected to experience significant growth in the coming years, attracting foreign investments while the desert city gears up to host World Expo 2020.
Cityscape Global, the huge real estate show each September in Dubai, provided the perfect platform for the emirate’s developers to showcase their portfolios to international investors.
Hosting 324 international and regional developers, the Middle East’s largest and most influential property investment show largely focused on completing developments ahead of the World Expo 2020.
“Many of the earlier mega-projects have been right-sized and matched with current market conditions. There were quite a number of high-profile projects and the luxury property sector has matured,” said Faisal Durrani, head of research at Cluttons, a global firm of chartered surveyors and property consultants based in London.
Pointing at the volatile global economy and the impact on Dubai, Durrani argued that the “Chinese economy is misfiring, oil prices going south and the EU debt issue any nearer from getting resolved”.
“With Dubai being well-linked to the international economy, there will inevitably be an impact at the macro level but it will be a lot more predictable and a lot less volatile than in the recent past,” he said, in reference to the real estate market crash that jolted the desert emirate a few years ago.
Regarding foreign investment in Dubai real estate, he said almost one-third of villa developments are being funded by international investors.
“Now there will be an interest from Iranian investors,” he said, “while we will be seeing high net worth investors from Far East and from China in the days to come.”
Cluttons’ September report on UAE property mentions that Dubai will experience a real estate boost when Iranian sanctions are lifted. Iranian nationals accounted for 12% of Dubai’s real estate transactions in 2010. By the first quarter of 2015, the investment was 3%, the report said, citing Dubai Land Department data.
Even though weaker oil prices may stem the pace of government-backed projects, the level of job creation in Dubai’s highly diversified economy is expected to remain stable, if not strengthen, as the city gears up for Expo 2020.
“Furthermore, mega-projects, such as Meydan One and its record-breaking 1.2-kilometre ski slope and 777-metre-high residential tower, Emaar and Dubai Properties’ plans for the Dubai Lagoon’s site, the [$31.8 billion] development of Al Maktoum International Airport, the [$3.4 billion] expansion of Jebel Ali Port and the planned Dubai Metro extensions will ensure a steady stream of new jobs, which will help to support growth in the real estate sector,” Durrani said.
Robin Teh, country manager UAE, for Chestertons, underscored the big prospects for investors in Dubai’s real estate sector.
“The UAE is a key investment destination for overseas investors due to its safe haven status and its growth path. The numbers have been on a steady surge in the last few years. Investors are looking to pump in money to the two key investment destinations, primarily Dubai and Abu Dhabi,” he said.
“The best part about investing in Dubai realty is that they offer rich dividends on maturity. Especially, when there is turmoil in other global financial markets, we are confident that owing to the social security and advanced infrastructure, with billions of dollars being invested in the infrastructure, the real estate sector is bound to flourish in the long run.”
Teh noted that Dubai’s real estate sector has evolved significantly since 2006 and this is reflected in buyers’ profiles.
“Residential property still remains a preferred investment choice for overseas investors due to the high demand,” he said. “However, interest in high-quality office space and retail space is catching up. With recent spate of launches in the residential segment, investors foresee an oversupply scenario and, therefore, have started considering commercial projects as well.”
He said the scope of current projects in the emirate is vast and has underlying effects to boost the emirate’s economy and provide a high quality of life for residents.
“For real estate investors, the UAE market is more regulated and stable with long-term opportunities,” Teh said. “Rental yields in the market are poised sufficiently higher compared to other developed locations. This proves to be an attractive feature for investors seeking income-generating assets.
“Overall, we are of the view that the market provides a good buying opportunity at current prices in the secondary market and a significant potential for capital appreciation in off-plan projects.”
A report by UK consultancy Savills ranks the UAE just behind the United States in terms of residential investment potential “as domestic wealth creation and increasing demographic and regional demand continue to grow”.
Analysts expect Dubai realty to rebound as it gears up for Expo 2020 and view the drop in prices as a healthy and positive market adjustment after the strong growth numbers of 2014. They are also of the view that the industry is entering a more mature phase, eliminating unhealthy speculation after instituting adequate checks and balances.