United Arab Emirates » Market Report

Building in Dubai is booming. There is a huge amount of new construction going on in the Emirate, part of the United Arab Emirates, or UAE, located along the Persian Gulf. It is estimated the one in three of the world's cranes are operating in Dubai. The Emirate of Dubai has approximately 1.3 million residents, while the city of Dubai is the largest in the UAE. There is an outstanding choice of restaurants, an unbelievable range of bars and nightclubs and with an ever-increasing number of internationally renowned landmarks and attractions appearing in the city. Dubai, whilst being an exciting, thriving, and bustling city still offers the calm family orientated environment that suits all ages.

The Human Development Report ranks 177 countries according to their level of human development. In 2006 report; the United Arab Emirates was placed 49th out of 177 countries from around the world.

Dubai's success story as a world leader in enterprise and innovation has earned the city international accolades and established Dubai as a leading commercial, trading and tourism hub. There is a focus on new infrastructure, growing commitments to education and medicine, increased industrialisation, and the growth of domestic capital market activity.

Dubai has ambitious plans to treble the amount of visitors to the country and to aggressively grow its population over the next ten years. Both these factors are creating high demand for properties, thus having a positive effect on house prices. The residential property market is growing hand-in-hand with tourism in Dubai resulting in price increases. Prices in Dubai are accelerating, and are still far from their expected peak, properties that represent real value for money are available, now is the perfect time to invest.

The Property Market

In addition to the booming office market there is a demand for residential property. Dubai Marina, Jumeirah Beach and the Palm Islands are all waterfront developments where property values have increased substantially in recent years.

The population in Dubai is diverse with over 85% of its residents being expatriates. For those looking for long-term investments in Dubai, this market is the ideal place. This is because there is a high level of demand for rental properties.

This massive demand stems from the fact that Dubai is attracting young, upwardly mobile entrepreneurs, businessmen and professionals, who are increasingly looking to set up businesses or homes in this city.

His Highness General Sheikh Mohammed Bin Rashid Al Maktoum, Dubai Crown Prince, UAE Defence Minister, is committed to making Dubai the tourism, leisure and entertainment capital of the region with a target of welcoming 15 million visitors to Dubai in 2010.

The USD 15 billion expansion of the Emirates Airlines fleet and the USD 4 billion expansion of the Dubai International Airport area and the creation of the Jebel Ali Airport is a testament of Dubai's commitment to attain this goal.

Tourism is one of the main factors driving the Dubai residential market. To further enhance the appeal of Dubai as one of the top tourist destinations in the world, Dubai is forging ahead with a US$5bn project aimed to give the Middle East its own version of Disneyland's wholesome family entertainment.

Demand for residential property is such that Dubai already has spread north into the neighbouring emirate of Sharjah, and is growing southward, through the glamorous seaside suburb of Jumeirah toward Jebel Ali, which is 25 kilometres or 15 miles away.

Ever since the summer of 2002 when Dubai allowed investors of any nationality to come in on select property developments, the face of Dubai has never been the same. Between 2004 and 2010, the total investment in the real estate sector will be in the range of US$50 billion. This includes landmark projects like Jebel Ali, Dubai Internet City, Dubai Media City, the Palm Islands and Jumeriah.

As soon as properties are released for sale, and this often happens before they are completed, they are sold and are often then resold at a significant premium. Generally, those who have bought property in Dubai have earned significant returns. 

Supply and demand

Most property markets are certainly influenced by the forces of supply and demand and Dubai is an example of how these forces directly affect property and rental prices. Thousands of new residents are arriving in Dubai causing demand for property to increase.

With newly arriving employees, and tourists the numbers of new residents is expected to continue rising until at least 2012 and the demand for rental and newly completed and completed re-sale properties will rise proportionally. As a direct result of these factors rental prices across Dubai have risen by on average 40% in the first 6 months of 2005 alone, and the prices for newly completed and re-sale properties are sky-rocketing. Demand was so great that the Dubai Government introduced a rent increase cap.

Interest from other Gulf countries has also been considerable, with oil-rich house hunters and investors from Kuwait and Saudi Arabia, in particular, attracted by the emirate's relaxed lifestyle. Buyers from India and Pakistan and, to a lesser extent, Britain and the Continent have also been involved.

Westerners, attracted by Dubai's year-round sunny climate, are mostly interested in the beachfront property in the Jumeirah district, while buyers from the Indian subcontinent tend to focus on areas closer to Dubai's historic centre, Deira and Bur Dubai. There is more supply coming on stream, though not enough yet to keep up with the expansion of Dubai. Secondly, there is no shortage of investors with cash and finance for would-be buyers at affordable rates.

House prices are also still at very reasonable levels by international standards. The argument for waiting longer only holds if there is a market correction coming in the near future. Otherwise the potential upside will more than compensate for a downturn, when and if it happens.

Our Forecast

International Property Brokers forecast that in the short and medium term Dubai property is an excellent choice for investors. With investors being able to expect 15-25% growth in the next year. This trend is expected to continue in the short term. In the medium term growth in prices will possibly fall to the 10-15% mark year on year as supply catches up demand by about 2011.