The first half of 2014 showed that the real estate market in Dubai is becoming more mature, gaining the stability inherent in all steadily developing sectors. A kind of barometer for its stabilization was the reports of world-famous consulting and analytical companies, vigilantly monitoring fluctuations in growth and falling prices. The conclusions that can be drawn on their basis, paint a fairly optimistic picture.
Market stabilization
If at the end of 2013, most leading agencies, recognizing in their forecasts an unprecedented increase in prices for residential real estate in the amount of 33%, predicted a further increase in the real estate sector in Dubai at the peak of price indicators, then by the end of the first quarter of 2014 it became clear that the market will stabilize earlier than expected.
Experts from one of the largest and most respected analytical agencies Jones Lang LaSalle in a report for the first quarter of 2014 noted that the investment forecast for the Dubai real estate market continues to improve steadily. According to the JLL Business Confidence Index, in the last quarter of 2013, this indicator reached the level of 144.3 points, which is 8% more than in the same period of the previous year. The economy of Dubai, according to the Department of Economic Development, will continue to strengthen in 2014 largely due to stabilization of the real estate market - according to the forecast, Dubai's GDP in 2014 should reach 4.7%.
At the beginning of 2014, as JLL experts noted, the real estate market in Dubai entered a new phase of development, taking advantage of the increased demand for housing. They called the increase in rental and sale prices in the emirate "logical and predictable," especially after the wave of falling demand that was observed in Dubai in 2008-2009. Another indicator of growing investor confidence was the increase in the total value of all sales transactions made in Dubai over the past six months, which increased by 30% and amounted to US $ 29 billion.
In January 2014, according to a JLL report, two new government agencies were created in Dubai to improve the attractiveness of the emirate for global investors and tourists. They were the Dubai Investment Development Agency and the Dubai Tourism and Commercial Marketing Corporation. In addition to these obvious signs of an obvious “growing up” and strengthening of the Dubai real estate market, an increase in stock market activity was also recorded at the beginning of the year. Several large Dubai property developers, including Emaar, were the first to announce their intention to make an initial public offering (IPO) in the near future to sell their shares on global stock markets.
JLL experts, as well as many other leading world agencies, as a rule, conduct a thorough analysis of the leading trends in the real estate market and are sensitive to the pulse of the city, so the forecasts made by them are rarely erroneous. The only mistake JLL experts made was the prediction that real estate prices will reach the pre-crisis level in 2013 - early 2014, which did not happen thanks to the timely measures taken by the Dubai government, and possibly due to similar warning forecasts. If you believe the JLL report for the second quarter of the year, today the future of investment in Dubai real estate looks more than encouraging. In it, the bureau experts reflected the leading trend of the year - to a decrease in the price growth rate.
According to Craig Plumb, head of the Middle East division of JLL, the measures taken by the government of Dubai to prevent speculation in housing, as well as the excessive price increase itself, which began to directly affect the level of demand, led to a slowdown in property prices in Dubai during second quarter of the year. At the moment, the upward development of the Dubai real estate market is still ongoing: according to the annual indicators of the second quarter, housing prices have increased by 36%. However, according to quarterly indicators, it is obvious that the pace of this development slowed down noticeably in the second quarter of the year, when prices rose by an average of 6%, compared with 10% in the first quarter of the year. Rise in rental prices in the second quarter also declined: from 7% in the first quarter to 3% in the second quarter. The decline in sales also indicates the stabilization of the overheated Dubai real estate market. So, the JLL report says that, according to data from May of this year, the volume of transactions for the sale of villas, in particular, decreased by 50% compared to the same period last year. However, it should be noted that such a downward trend in growth rates should not cause concern from any point of view. Yes, now is not the time for quick profits, experts say, but lower prices are beneficial in the long run. On the one hand, it gives guarantees that in the near future we will not face another “soap bubble”, and on the other hand, it gives potential investors the opportunity to “catch up” with the constantly slipping due to rapid price increases, opportunity to invest available funds.
Luxury housing
The widespread decline in housing prices in Dubai in the first half of this year was reflected in all sectors of the real estate, but do not forget that the average value of the price growth rate is an average indicator, but in reality different sectors can show very different results. , depending on various factors. One of these factors is the balance of supply and demand, which, according to another authoritative consulting and analytical agency Knight Frank, gives rise to the main trends in the formation of property prices for various purposes and price categories.
Knight Frank, in particular, regularly compiles the Prime Global Cities Index, which also reflects the level of premium housing prices, for the demand for elite luxury housing around the world. And since Dubai is, to some extent, the world center for the concentration of elite real estate, due to the favorable tax conditions for investors, this indicator is more than relevant for the emirate. "As the crisis in the Eurozone resolves and the overall economic situation improves," the 2013 Knight Frank final report said, "demand for luxury real estate around the world is growing steadily, despite the fact that financial markets can provide a fairly low percentage profitability. " The Prime Global Cities Index for Dubai for the last quarter of 2013 indicates that the annual rate of price growth in this quarter was the highest since 2010, but the quarterly growth rate was the lowest since 2012.
In March 2014, Knight Frank published a rating of the most expensive cities in the world in terms of the cost of one square meter of elite real estate. Of the 20 cities in the world analyzed in the Knight Frank report, Dubai ranks 19th in terms of premium housing prices, only Cape Town is lower, where for the US $ 1 million you can buy 215.1 sq. M. m of luxury housing. At the same time, Knight Frank experts emphasize that Dubai prices for luxury housing still have room to grow. So, for US $ 1 million in Dubai you can buy 146 square meters of premium housing, which is six times more than in London, seven times more than in Hong Kong, and 10 times more than in Monaco. Other major cities in the world, such as Moscow, Mumbai and Istanbul, also remain more expensive than Dubai, in terms of the cost of 1 square meter of real estate.
Regarding the pace and volume of price increases, here Dubai, according to the Knight Frank report, took 7th place out of 10 cities in the report, and 8th took the capital of the UAE, Abu Dhabi. Dubai and Abu Dhabi took such positions on this list due to the growth in premium housing prices by 17% and 15% in 2013, respectively. In the second half of the year, according to the latest Knight Frank report, premium housing prices will rise by another 10-15%, largely due to the fact that in the next 18 months not so many objects in this sector will be commissioned, which, of course, provokes high demand. Thus, elite real estate in Dubai is one of the most profitable objects for investment, the capitalization of which is growing steadily and steadily.
Building Boom
Few in any other city in the world per week there are so many announcements about the launch of new projects, as in Dubai. But, as experts at the analytical agency CBRE note, the emirate is not only able to organically accept, but also needs at least 30 thousand new real estate properties.
Today, the construction boom has become the everyday reality of the "city of the future", which is difficult to imagine without large-scale construction sites and a forest of construction cranes. However, in the areas of the city that are popular with investors, home buyers and tourists, there is less and less free space for development, so the cost of land here is growing steadily, which means that prices for newly built housing are also rising. But, as mentioned above, there is a limit to prices, so Dubai's developers are increasingly looking in the direction of more profitable plots in remote areas of Dubai. Buyers of housing, who want to reduce the cost of purchase, also look there.
A recent report by the CBRE analytic agency suggested that Dubai’s developers will build more middle-class housing in remote areas of Dubai. According to CBRE, this year developers will build about 17 thousand units of new housing in Dubai. Most residential properties will be created as part of large-scale mega-projects in areas such as Dubailand, Jumeirah Village Circle and Dubai Silicon Oasis. In just one week of April, according to CBRE, three major real estate players - developers Emaar, Dubai Properties and Lootah Real Estate - announced the start of construction of 845 new properties on the outskirts of Dubai.
The rapid growth in real estate prices, although it has tempered in the first half of 2014, is increasingly forcing many buyers to look for more affordable mid-priced housing options, which creates increased demand for such properties. About more than the large-scale construction of facilities in all areas in Du-bai is also mentioned in several reports of the analytical company Meed Insight. According to its own rating of this office, Dubai for the second year in a row took first place in the number and scale of construction projects. The UAE as a whole and Dubai in particular have again taken a leading position among all countries of the Middle East in the pace and volume of construction projects. Most of the mentioned projects were implemented in Dubai, where in 2013 US $ 20.6 billion was spent on construction, which amounted to almost 52% of the total budget of the construction sector in the UAE. The total cost of construction projects of various facilities that have yet to be implemented in all countries of the Middle East region is more than US $ 1 trillion, of which US $ 428 billion falls to the UAE. Thus, in the next five years, the UAE also has every chance to maintain a leading position in the pace and volume of construction.
This year, the total value of construction contracts in Dubai currently stands at more than US $ 100 billion, which allows us to talk about a more than twofold increase in sector volumes compared to last year. At the same time, at this stage, more or less large projects in Dubai are either initiated and owned by the public sector, or controlled by it. Many large and important projects for the city, previously "frozen", are again revived and are nearing completion.
Among them - a tram line, metro line and Palm Jumeirah Mall on the famous man-made island. All this inspires investors with great confidence and allows us to be optimistic about the future of the construction sector in Dubai, according to a report by Meed Insight.
All-round development
At the end of last year, all analytical agencies noted that the Dubai real estate market is developing not only rapidly, which caused concern, but also comprehensively, which inspired confidence. The revival of the market captured all sectors without exception and continued in 2014. One obvious sign of growing investor confidence has been the increase in the number of companies doing business in Dubai. And this, in turn, could not but cause a rise in prices in the office real estate market, as CBRE experts noted. The analytical and consulting company CBRE conducted a study of more than 70 large international corporations, which generally occupy 25 million square meters of office space worldwide, and found that the percentage of those who plan to expand their companies in the Middle East in the near future in a year increased from 24% to 30%. Today, one in three of the international companies surveyed by CBRE plans to identify their presence in the Middle East region, where Dubai is the most attractive location.
The main trend in this market in the future, according to experts, will remain the priority of the quality of office real estate, which means that such areas and complexes as DIFC, Dubai Downtown and Tecom will be in greatest demand. Another 850 thousand square meters of office space will be commissioned in Dubai this year. In 2014, experts from another leading global analytical company, Cluttons, also noted increased investor interest in industrial and commercial real estate in the free economic zones of Dubai and predicted a further increase in interest in projects in this sector.
According to Cluttons, free economic zones will begin to enjoy special demand, where the number of free commercial and industrial real estate is steadily declining, as in the Free Industrial Zone Dubai Industrial City or Dubai Investments Park. Thus, experts at most analytical agencies and consulting bureaus agree on a promising future for real estate investments in Dubai and the UAE. In this sense, price stabilization of the market can only become an additional benefit for those who count on long-term prospects.
You can obtain additional information about purchasing property in Dubai from IMEX Real Estate specialists by phone in Moscow +7 (495) 5100008, toll-free phone in the UAE 800-IMEX (8004639) or by sending a request by e-mail [email protected].
