Dubai has been one of the biggest success stories in the overseas property industry. But what awaits the Dubai property market in the next few years.
Dubai has been one of the biggest success stories in the overseas property industry. The growth in the market, which in the first 11 months of 2007 was reported to be 18.7 per cent in both villas and apartments, has sustained at a high rate for some years now, prompting some investors to buy sight unseen. Commentators are split as.
o whether this growth can be sustained, but investment in the real estate sector is predicted to provide 35 per cent of Dubai’s GDP over the next five years.
Supply & Demand: One of the biggest contributory factors in the growth of the Dubai property market has been the fact that demand has always managed to outstrip supply. The regular shortfalls in supply are often due to late-running projects and the immense speed of the influx of new workers and residents who all need somewhere to live.
Investment bank EFG-Hermes has reported that the market will be subjected to its biggest shortfall in supply in the second half of 2008, which means prices will hit a peak of sorts this year. After that, the report suggests, the market will begin to swing in the favour of buyers. It says there will be 64,000 units to come onto the market as available for occupation in 2008, and a further 68,000 in 2009.
Tourism: Tourism is the most important industry for the future of Dubai and is also its fastest-growing industry, with over 11 per cent of the GDP coming from holidaymakers, and generating $1.9 billion of economic activity. The introduction of huge new attractions will fuel the growth in tourist numbers, who will be serviced by the huge new Dubai International Airport.
On the other hand, the number of hotel rooms in the Emirate is set to rise by around 33 per cent per year until 2011, which has led industry watchers to suggest that hotel occupancy rates may fall as low as 60 per cent, compared to the current levels of more than 80 per cent.
Immigration: The lenient tax regime in Dubai has been one of the major attractions for property investors and a large number of businesses, many of which are multinational companies, and some of which have made their headquarters in Dubai. The investment banking sector is predicted to undergo huge growth in Dubai in 2008, adding to the internet and media hubs in the city. This brings with it an influx of people with large salaries who are looking for somewhere to live, and should also employ a proportion of the local population in well-paid positions.
Rentals: Letting property will be one of the most important parts of the future for those buying property in Dubai. Since November 2005, there has been a government-imposed rental cap at seven per cent of the property value in order to protect the tenant market from potentially astronomical rises in rental costs due to the gap between supply and demand. This cap is currently not due to be renewed at the end of this year, allowing landlords a completely free market. This will push many locals in Dubai to consider buying their own property instead of renting to protect themselves from the potential rises.
The property market in Dubai has had its detractors for some time now, people who seem to be keen to see the property buying boom there come crashing to a halt. However, Dubai keeps on fighting back, sticking resolutely to its free, tax-efficient methods. The result has been a highly modern centre of business excellence, leisure activities and innovative development.
