Real Estate Investors Keen on

Potential Growth Knight Frank

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"Dubai is the ultimate case study for anybody who wants to comprehend the profound
influen e that the glo alisation of wealth e erts on the worlds propert markets." Liam
Baily, Residential Research, Knight Frank - Financial Times 16/09/2015

Over the past decade, the emirate has been on a real estate roller-coaster ride of boom,
crash and recovery. Property values halved between 2008 and 2010, but then rose
phoenix-like from the desert to regain most of their losses by 2014.
The rallying prices of years 2013 and 2014 in Dubai have set off the alarm so authorities
had to react to prevent a market boom-and- rash
le. Du ais arket regulators,
wielding mortgage caps and a doubling of transaction fees, stepped in to reduce
speculation.
This combined with deteriorating oil prices, currency fluctuations, a strong US dollar, to
which the United Arab Emirates (UAE) dirham is pegged and a series of economic and
political failures in different parts of world, means lower levels of demand from most
regional and international group of buyers looking to purchase properties in Dubai.
Add an excess of new-build supply into this mix, and the net impact has been a 12 per
cent fall in mainstream property prices over the 12 months to June 2015.
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Nevertheless, falling prices are not totally bad news. With the government stepping in
to curb speculative activity through tightening mortgage regulations and capping price
increments, it is evident that lessons has been learnt from the 2008 downturn and the
market is heading steadily to be more mature and better controlled.
More interestingly, with price falls continuing to outpace rental value declines, initial
yields are rising. Reaching more than 7% in rental yields in the mainstream property
segment, Dubai still stands tall among real estate capitals in the world for investor
seeking income generating properties. Never to forget that returns here are always tax
free.
In addition, the magnitude of decline in prime residential prices (-4.5%) in the year to
June 2015 was smaller compared to the mainstream segment.
Looki g i to the it s su -markets, the picture is a bit more positive as well. Indemand areas are mostly in the prime segment including villas, townhouses and
apartments in the Palm, Emirates Hills, Dubai Marina and Downtown for example. Even
during the 2008 downturn, prime properties saw lower levels of declines compared to
less esta lished areas, oted Diaa Noufal, MENA Research at Knight Frank Dubai office.
Regional competition
Early enough, regional markets have picked up the sparkle of Dubai speedy
development in a way to compete with the emirate and gain a share of the inbound
flow of global private wealth.
Qatar has legalized foreign ownership as early as 2004, although restricted to a few
specific areas. This was reactivated when the first waves of freehold properties started
to pour in the market in The Pearl waterfront development. Demand has been rising,
albeit with a slowdown this year following the oil price crash and regional instability.
Buyers tend to be residents of countries within the Gulf Cooperation Council, although
the number of European buyers is rising.
Demand for Oman property from across the Middle East and from India and Pakistan
has risen in recent years. This is partly due to the potential for some buyers to secure
residency following purchase, but also from relatively strong annual investment returns
of about 6 per cent.

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For Saudi Arabia, the biggest economy in the region and the largest oil reservoir in the
world, the Dubai market has been an investment opportunity rather than a transferable
experience. However, property market in Saudi has been seen evolving rapidly over the
last decade with mega scale projects by Dubai-experienced developers such as Emaar
and Limitless.
Abu Dhabi is where the Dubai model is most evident, albeit on a smaller scale.
Transaction volumes there have fallen in the past year, but prices have been relatively
resilient, rising by about 5 per cent in the 12 months to June 2015. As with Dubai, the
rules on mortgage caps also apply to reduce the risk of bumpy cycles.
Outlook
Despite the rise of alternative regional markets for international buyers, Dubai and Abu
Dhabi will remain the focus for most activity in the region. Investors, developers and
governments here, all alike, are counting on the potential economic growth in both
cities- led by a forecasted 20% increase in the UAE population by 2030.
Economic positive prospective of Dubai is no doubt deeply founded. Its airport already
serves 70m travellers a year with capacity set to rise to 200m. The port at Jebel Ali is
e pe ted to e o e the worlds largest i the e t 15 ears, refle ti g Du ais
emerge e as Chi as logisti al hu for the Middle East a d Afri a.
Having in mind the Expo 2020 in Dubai and the massive economic activity linked to it,
demand is seen gathering momentum in a steady pace over the next seven years and
beyond.
A more mature market, a better investment return, and a highly connected city all point
to a positive future of the property sector in Dubai.

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