The growth in Dubai real estate shows no sign of reversing its upward trend.
In recent years, Dubai real estate has been something of a phenomenon. The biggest driver of the property market is demand generated by a steadily increasing population at 5.56 per cent per annum since 1992.
The Dubai real estate sector has evolved into one of the leading drivers of the emirate's economic growth. The last 15 years has seen a phenomenal 150 per cent increase in the number of available housing units, coupled with a 75 per cent increase in residential structures. There has been an uninterrupted stream of development projects backed by governmental commitment to developing the emirate's infrastructure. All told, real estate development has contributed 10 per cent of non-oil GDP in recent years.
Initial 'gold-rush'
The growth in Dubai real estate shows no sign of reversing its upward trend. The biggest driver of the property market is the demand generated by a steadily increasing population. Dubai Municipality statistics register a 5.56 per cent population growth rate per annum since 1992, and Dubai's perimeters are
expanding an average of 6.2 per cent every year due to new construction projects.
Unprecedented growth supplemented by massive demand has led to inflation allowing investors to earn up to 200 per cent return on initial investment.
Investors initially focused on short-term high yield, and large volumes of property transactions that led to the birth of a plethora of real estate intermediaries who utilised the heavy trade to generate commission-based revenue. The intense activity prompted a gold rush with intuition-based investment coming to the fore and high premiums being paid in the hope of generating commensurate return. As more investors jumped onto the bandwagon, return on investment ratios and considerations were neglected as the cycle of purchase and sale gathered momentum, with speculators ruling the roost.
Another dynamism peculiar to the youngest real estate market in the world has been the unsynchronised demand and supply-side cycles. A massive number of projects were announced in 2003 and 2004.
However, latency between announcement and completion means that in reality, the supply cycle till present has lagged behind demand, creating an artificial shortage.
The shortage has in turn led to inflated premiums and high rents. Estimates by Dubai Municipality suggest that rents have increased by 37 per cent.
Market correcting itself
However, of late, the Dubai real estate market is losing its hyperinflation and is coasting to realistic figures. The market recently revaluated itself downwards, resulting in a number of singed fingers.
Those who fear that the revaluation was a symptom of the property ?bubble' popping and the market sliding to a crash are overly concerned. The market is merely doing the sensible thing by gliding downwards towards a more realistic standing.
The market will also correct the disparity between supply and demand with a number of projects set to finish in early 2006, injecting fresh supply of housing units that will relieve upward pressure on rents as supply and demand converge.
Local agent Asteco predicts up to 84,000 new units within the next three years, which is expected to be sufficient in servicing demand, even counting thousands of skilled workers brought in by the booming economy and multi-million dollar projects.
Meeting ground
In the wake of these changes, the need arises for common ground where developers and investors may meet to explore the new dynamics of the real estate market. The International Property Week 2006, being held at the Dubai International Exhibition Centre (DIEC) from today until the 23rd, is gearing up to provide just such a platform.
With broad-backed support from investors and premium real estate developers and concerns both international and local, The International Property Week will be observed closely by the market as an indicator of trends and buyer patterns.
Dawood Al Shezawi, Chairman, Strategic Marketing, organiser of the show says, "The real estate market in 2006 will be a fascinating place. The market is gearing up for another cycle of intense activity. We aim to cater to first-time homebuyers that haven't as yet bought in the real estate market, as well as investors looking to complement existing assets.
The show will allow buyers to evaluate various offerings before making strategic purchases in line with their long-term plans, and we will be considering interesting options such as time-sharing to facilitate ownership"
The International Property Week will allow participants to appraise a multitude of international investment opportunities
of interest and attract investment by regional and international investors alike. The property show will also host free seminars for private investors and real estate consultants, offering a comprehensive synopsis on global real estate investment opportunities and necessary legal implications and ramifications.
David Domoney, Managing Director of The Domus Group, co- organiser of the show, says, "In light of the dynamism in the real estate field, we are mindful of the fact that the Dubai Property Week 2006 will serve as the clarion call week for the new, mature property market and will serve those investors looking to strategically diversify or balance their portfolios after the speculators have been gleaned out"
(- Text provided by organisers of IPW)
