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Ten reasons Dubai real estate will continue to boom
Dubai real estate may well be the next asset class bubble to be created by inappropriate interest rate levels set by the US, alongside Hong Kong property. But there are at least 10 good reasons to think the present realty boom in Dubai will continue for rather longer than many outside observers believe possible.


They may seem high now, but property prices will continue to rise


1. Dubai mortgage rates are around 8.5 per cent and have yet to adjust to the recent US rate cuts, which they have to do because of the dollar peg to the dirham. Just a couple of years ago local mortgage rates of seven per cent were available. Therefore the downward pressure on the cost of home finance is clear, and if the local mortgage market follows Hong Kong and becomes more competitive, then interest rates could go much lower, making it significantly cheaper to buy than rent. Real interest rates are already negative due to high local inflation.

2. Rental yields in the Dubai market of 7-10 per cent are abnormally high by international standards. Rents are unlikely to fall in a booming market, so it is more likely that rising capital values will gradually pressure yields down towards global levels. There is no reason why rental yields should be higher in a booming city like Dubai than in a city where the economic outlook is poorer.

3. The hype about Dubai development projects has admittedly duped even this skeptical correspondent over the years. The fact is that far less supply is coming on stream than promised by overenthusiastic developers, due partly to limited supplies of manpower and materials. Dubai Properties is one of the biggest and has just said it will deliver 5,000 units to the freehold market in 2008 which is not nearly enough to meet surging demand.

4. Dubai house prices are still low in absolute terms in comparison to other global cities with similar salary levels. The HSBC survey of house prices in comparison to per capita GDP put Dubai and Abu Dhabi near the bottom. This is a historic anomaly that will be eliminated by price rises.

5. Six years ago, when Dubai freehold began, it was a market without any formal legislation and regulatory infrastructure. Now it has world-class laws, a state-of-the-art land registry and a strongly-led regulatory authority. Hope has been replaced by experience.

6. The Dubai Financial Market crashed in 2006 pushing local investors into property as an alternative. It recovered in late 2007, but is now again trending downwards with global stocks, and has become highly volatile, shifting over 10 per cent in a day. Expect stock market participants to again seek a more stable alternative.

7. Indeed, the absence of investment alternatives is a major theme for 2008. Global stock markets have had their worst January in history. Recent US interest rate cuts leave deposits paying 2.8 per cent. This makes Dubai real estate look attractive as an alternative. Where else offers such a return?

8. In the same way that the local stock market crash attracted foreign bargain hunters to invest last year, foreign investors in search of yield are also increasingly investing in Dubai real estate. Problems in the UK housing market might be dissuading some buyers, but large numbers of oil-rich Russians, for example, are now buying in Dubai.

9. Dubai still has some undeveloped market niches in real estate, such as holiday lets and fractional ownership, which are big and even dominant market phenomena in many beach resorts around the world. This source of higher rental yield on property has therefore yet to be fully tapped.

10. The Dubai Government has been the most proactive developer in the emirate, and its recent legislation and regulatory initiatives suggest that this support is not only likely to continue, but will respond appropriately to any adverse market developments.

I'm a simple guy - I believe in fundamentals like looking at house prices as a mulitple of salaries and looking to see how many people in Dubai earn enough to buy a house given the skewed distribution of earnings here.

I'm constantly reminded of the maxim in financial circles:
The most expensive words in the English language are 'this time it's different'!


Fortunately I am not tempted to buy property here, as I don't have free capital and choose not to borrow to speculate. There is certainly an up-side, but the down-side of capital losses should not be discounted either.

I have been expecting a price crash in the UK for the past 4 years (but was glad when it didn't happen because I own property). So, my track-record of predictions isn't good - but I still feel that the fundamentals do come home to roost and there is only so long you can keep up the illusion of wealth generated from nothing other than sentiment that prices will continue to rise.

Therefore, I'm just an armchair observer and hope that people don't get burnt too badly when the downfall comes as I expect.

Cheers,
Shafique

Alex1111 wrote:Ten reasons Dubai real estate will continue to boom

I may be stating the obvious, but Alex has nicked content from another website without giving credit.

You did state the obvious Bonk so why make it an issue?
Dubai Chronicle on-line actually.
I'm just a poor country boy not capable of such mighty fancy words.

Its poor etiquette not to quote the source (a nicer way of saying plagiarist)
Also if people think it is *YOUR* advice coming from you - we want to know why you are an expert in giving advice on this topic?

Alex, Its all a Big Scam.. Shhhhh!! abt properties.. DF is run by Land/Builders/Property Mafia ... tsk tsk ..

And yes.. giving credit to the source is a wise idea, any time.

Alex1111 wrote:You did state the obvious Bonk so why make it an issue?

Because you didn't give credit where credit is due.

Dubai Chronicle on-line actually.

Not the original source. If it's there, then they've taken it from ameinfo.com (not that I'm a big fan of ameinfo but at least they don't misrepresent themselves). DC also republishes content without giving credit to the original source.

I'm just a poor country boy not capable of such mighty fancy words.

Didn't know the first part but agree with you on the second .

The country is fine...its the people that stay in it that are crap.

The atmosphere will never be even close to anything like california...europe etc...(palm or no palm)

ugly
boring
dirty
no quality

Scarlet try reading my post again where I say who wrote the report ! I am not an expert in this field.Jesus if I came back here in a month u jokers will still be whining on about who gets the credit !

Alex1111 wrote:Scarlet try reading my post again where I say who wrote the report ! I am not an expert in this field.Jesus if I came back here in a month u jokers will still be whining on about who gets the credit !

Cool it mate.. give it a break.. Creid or no credit.. U Posted some info that u thought would be helpful.. all good

Exactly

St.Lucifer wrote::) Cool it mate.. give it a break.. Creid or no credit.. U Posted some info that u thought would be helpful.. all good

I admire your efforts at trying to calming things down but I flatly disagree that it's all good. It's not.

Alex obviously thinks there's nothing wrong with theft of intellectual property, if s/he did, s/he would have at least edited the first post.

bonk wrote:

St.Lucifer wrote::) Cool it mate.. give it a break.. Creid or no credit.. U Posted some info that u thought would be helpful.. all good

I admire your efforts at trying to calming things down but I flatly disagree that it's all good. It's not.

Alex obviously thinks there's nothing wrong with theft of intellectual property, if s/he did, s/he would have at least edited the first post.

hmm 'it' as in plagiarizing..not good at all.. like i pointed out in my first post.. but I'm more interested in seeing some new people post something here...sure i'dnt wanna see more copy paste stuff or threads lifted from other forums or articles..

But i'm all for giving him/her another chance.

And yes.. giving credit to the source is the way it has to be , any time.

Bonk your an idiot.Not stating the source of my post was a mere oversight.Had someone else put that on I would have assumed straight away it was 'borrowed' from elsewhere.As soon as it was pointed out that the source was not on there I posted it.Let that be end of story and stop whining on.St L,I disagree with you.I think its good for people to share articles they come across if they feel it may be of interest to others.See,u try to do a little good and all the whingers come out of the woodwork.

Thanks for sharing the article Alex. And bonk thanks for pointing out the source.

can we move on now ?

here is another article re-enforcing that the property prices in the key areas are not going anywhere but up !

http://www.business24-7.ae/cs/article_s ... ineID=2128

And yet another article reinforcing that:
FROM DUBAI CHRONICLE !!!! NOTHING TO DO WITH ME !!!! NO CREDIT REQUIRED !!! FROM THE DUUUUUBAI CHRONICLE!!! OK !!!

DUBAI CHRONICLE :
12 February, 2008
Dubai crash fears unreasonable


Experts looked to calm fears that a possible market crash could stunt Dubai’s impressive growth on Monday, arguing the emirate’s expanding population and sound economic fundamentals would sustain future growth.

Speaking at the Dubai International Financial Exchange (DIFC), a panel of experts argued that the expansion of Dubai’s market, particularly in the real estate sector, was not in imminent danger of “bursting” as it is underpinned by sound economic fundamentals.

“It is easy to come to Dubai and look around at all the cranes and think that it’s all a bubble waiting to burst,” said Farouk Soussa, director for Standard & Poor’s sovereign ratings division. “I would caution against taking the ‘bubble’ approach,” he said.
Soussa said the region’s high population growth, expected to increase at close to 10% over the next decade, ought to sustain high demand for residential property and service the needs of the expanding economy.

“If you take the UAE as a whole, there are few pitfalls from a ratings perspective” Soussa told ArabianBusiness.com after the official discussion.

Speaking specifically about Dubai and the level of debt the emirate has taken on in order to fund its expansion, Soussa said he remained confident the emirate is on sound footing.

“While it [Dubai] does have a greater debt than some of its GCC partners on a gross basis and even on a net basis, it is certainly not disproportionately greater, or not even as great as some of the more highly rated countries in the west,” he said.

Sousa emphasized the emirate's strong growth in real estate as a sound economic fundamental, saying that supply bottlenecks will be serviced by the large amount of new inventory coming on to market in future months.

Adding to Soussa's comments, Jan Willem Plantagie, regional manager for Standard & Poor's in the Middle East, pointed toward the growth opportunities in emerging markets as a key driver in attracting international investment capital.

“Dubai will continue to be a gateway for both global investors seeking to maximize returns in emerging markets and for regional investors looking to grow abroad,” Plantagie said.

The diversification of Dubai's economy and its repositioning as a finance and tourism hub would also add to the underlying strength of the record GDP, currently at around 13% in real terms, he said.

Asked when a possible correction in the regional markets may occur, if at all, Plantagie said any answer would be “pure speculation” adding only that the situation is “being eyed very closely” by investors.
---------------------------

A friend told me that a house in Dubai can cost from 50.000.000 aed to 300.000.000.000aed, is that true? i hope one of you answer me im so curious.

3 million aed up to 45 million aed for villas

as an architect,

dubai's got great buildings, great vision, very poor infrastructure that i hope will be improved at some stage..

but at the end of the day, all these buildings are vacant, and i dont see in the foreseeable future, enough people coming to inhibit them... at least not in my lifetime.

this will cause a massive slump in the real estate market... dubai's not being exactly smart about it all, but one would hope they would learn from models of other countries that started doing the same thing and slow down and pay a little more attention to consumer demands, rather than just building huge landmark after huge landmark.

Alex1111 wrote:Bonk your an idiot.

Oh good. I wasn't sure about that myself.

ebonics wrote:as an architect,

dubai's got great buildings, great vision, very poor infrastructure that i hope will be improved at some stage..

but at the end of the day, all these buildings are vacant, and i dont see in the foreseeable future, enough people coming to inhibit them... at least not in my lifetime.

this will cause a massive slump in the real estate market... dubai's not being exactly smart about it all, but one would hope they would learn from models of other countries that started doing the same thing and slow down and pay a little more attention to consumer demands, rather than just building huge landmark after huge landmark.

Don't you think the remark "very poor infrastructure" is over the top?

Cristin wrote:A friend told me that a house in Dubai can cost from 50.000.000 aed to 300.000.000.000aed, is that true? i hope one of you answer me im so curious.

I will take 10 then thank you

No if your friend was talking about villas, he is waaaaaaay off. The cheapest I have heard of was 1.5 million and that was a year ago.

In fact, even studio apartments that you can buy would cost you at least 400k as far as I know. Though most likely even more.
But I sense that your friend was talking about the yearly rent for apartments, not the price of the place. In that case he/she would be spot on as that is pretty much the range you would find depending on the type.

sage & onion wrote:

ebonics wrote:as an architect,

dubai's got great buildings, great vision, very poor infrastructure that i hope will be improved at some stage..

but at the end of the day, all these buildings are vacant, and i dont see in the foreseeable future, enough people coming to inhibit them... at least not in my lifetime.

this will cause a massive slump in the real estate market... dubai's not being exactly smart about it all, but one would hope they would learn from models of other countries that started doing the same thing and slow down and pay a little more attention to consumer demands, rather than just building huge landmark after huge landmark.

Don't you think the remark "very poor infrastructure" is over the top?

depends, what are we comparing to?

compared to any developed nation, its a joke.... the day i got here the airport was struggling to cope with a bit of heavy rain, the streets were then flooded. how on earth can you ignore a guttering system in something as crucial as an airport??

id hate to think what happened to many other buildings being pelted with rain flat stick with no guttering...


public transport?

no underground system?

the streets of dubai not sustaining its own traffic? it takes you 2 hour to get to and from a meeting in dubai these days. abu dhabi's probably worse in terms of town planning, its like a catacombs between blocks with cars parked everywhere, all different directions.. i can go on and on.


i think poor infrastructure is rightfully so - if you think otherwise, maybe you havent experienced the dubai i did.

dont get me wrong, they seem to have all the right ideas for the future etc, but they're not prioritizing in terms of their town planning...

ebonics wrote:dont get me wrong, they seem to have all the right ideas for the future etc, but they're not prioritizing in terms of their town planning...

Town Planning...they will implement that part when every mega projects they have planned have been built. like A-Z procedures but instead in Dubai its B-Z then A.....

reviewer wrote:

ebonics wrote:dont get me wrong, they seem to have all the right ideas for the future etc, but they're not prioritizing in terms of their town planning...

Town Planning...they will implement that part when every mega projects they have planned have been built. like A-Z procedures but instead in Dubai its B-Z then A.....

truth

painful truth... i had this dream that this place is a super-power, super-efficient, every second lost is worth a million dirhams down the line...


my was i let down.

Ebonics -
Totally agree. It doesn't take a genius to recognise that Dubai is slowly choking itself on it's own traffic. "too little, too late" is something that I have heard time and again for the city. Town planning is a joke.

Actually, planning is a joke, come to think of it......

AD is not as bad. Sure, the traffic gets bad, but nothing compared to the car park of SZR everyday. There is a move afoot to totally alter the main arterial road from city out - an extension of Salam Street for those that know - but that will require some real careful planning if things are not to go t*ts up.

Again, you need onyl travel as far as Doha to see AD 10 yuears ago. They are struggling with infrastructure already and that is drastically reducing the effectiveness of any expansion to the city.