The decline in global property prices has started to seep into Dubai, although it’s arguable that this is a short- term correction born as a direct result of the world credit crisis and the speculative nature of investors. No one can deny the fundamental strengths of Dubai in terms of tourism, trade, real estate investment and as a potential financial power house of the Middle East.
The knock-on effect has been the pace of off-plan sales, which have inevitably slowed in recent weeks, although property that is completed or close to handover is still very much in demand and interestingly has seen minimal impact in pricing. Statistically the ratio of investors to end-users was originally 60:40. We have witnessed a turnaround, which is positive for the market as now we are seeing real buyers enter the market and purchasing for personal use.
The UAE market as we see it today is simply in a lull period. However, Dubai as we know is a global fusion metropolis. The current global economic crisis could yet become a bonus to the UAE, which can offer alternative support to investors as its banks are safe, liquidity is available and personal debt (in global terms) is at a minimum level. This is supported by the fact that Abu Dhabi is the federal capital of the UAE and Dubai is central to the continued success of the country.
Current investment opportunities in Dubai are appealing and I predict that in six months to one year prices will have stabilized at 2006 and 2007 values. In addition, the range of legislation implemented over the last year by RERA and the Land Department has provided transparency and stability to the market, which in turn will become attractive to international institutions when rebuilding their balance sheets. Dubai, in short, is in a period of transition where it has begun as an infant market and is developing to be both a professional and established one, as is everything else that is growing with it.
Of course, there are several specific factors that have helped shield Dubai from global market turmoil. For one, Dubai has firmly established itself as a highly marketable global brand, with its potential to maximize the business value of investors being among its biggest brand attractions. One hundred percent foreign ownership, zero personal and corporate taxation, state-of-the-art infrastructure, fast employee visa processing, full repatriation of capital — these are just a few popular incentives that define the conducive investment landscape of the emirate. Its massive investments to develop its air, sea and land transport facilities, which have transformed Dubai into one of the most highly accessible destinations in the world, have also helped accelerate Dubai’s reputation across global markets. With a strong transport sector, Dubai continues to drive more business and investment traffic into the emirate.
The combination of widespread infrastructure development, strategic location and proactive government policies has likewise cultivated a unique environment that breeds creativity, ingenuity, professional excellence and high technology — all of which are associated with the Dubai brand.
The message is thus clear: Dubai is a mature, yet highly dynamic investment destination. Mature, because Dubai has successfully incorporated key measures that ensure sustainability and long-term growth, e.g. gradually removing speculators from the real estate market and replacing them with longer-term investors and end-users. Ultimately, it is its dynamism reinforced by its resilient character and mature outlook that continues to enable Dubai to harness growth opportunities as they come, regardless of the circumstances.
Iseeb Rehman is managing director of Sherwoods Independent Property Consultants.