REAL ESTATE MARKET IN DUBAI, UAE

Real Estate Market in Dubai, UAE

Abstract

Dubai has experienced robust growth in recent years. The combination of Dubai becoming an international destination and the wealth emanating from the region, as crude oil prices surged in recent years has allowed it to build a strong real estate market. Dubai's property prices have risen primarily on the back of the increasing expatriate population, speculative investments and rising construction costs. Like all markets though, it has to cycle on occasion and with the onslaught of the economic crisis, real estate prices have begun to fall. Whilst Dubai's real estate contribution to GDP has remained relatively stable between 10%-11% in recent years, it is expected that the contribution will decline in the immediate term due to the slowdown in the market.

Dubai property market

Introduction

Dubai real estate sector represented AED26.3bn (or 47.2%) of the total market value of real estate in the UAE AED55.8bn in 2007 (Abu Dhabi holding 28.3%). With the economic crisis taking shape in Dubai, several observers have suggested that 30-40% of new real estate project launches have been delayed or canceled. Also, according to the Dubai Land Department, in March 2009, only 163 land sales transactions were registered, compared with 559 in March 2008, a 70.8% year on year decline.

Some observers believe that the Dubai property market is in an oversupply essence along with investor confidence falling, and the lack of available credit which has consequently led to property prices lower and rents.

Although total credit to the real estate sector reached AED818, 940mn in June 2008, this figure is expected to be reduced in the back of the recent tightening of credit conditions. In addition, the expatriate output on the back of job cuts and therefore lower demand is also a contributing factor to the slowing housing market. In addition, many observers suggest that Dubai's property market has over-whether to approach the top and ultra high market and, essentially, not just the excess supply is a problem, but the dynamics of excess supply (ie is ultra luxurious character.)

Research Aim

When will we see a collapse in the property market in Dubai? At the current juncture is unclear. Government intervention will certainly help and a number of initiatives and amendments to existing laws can regenerate demand and therefore stimulate the housing market activity again. Some observers believe that the removal of the existing link between employment and residency status and a clarification of the law providing for the residence of foreign buyers of real estate can be useful to establish a floor in the housing market. This, together with recent standards and guidelines issued by the Dubai Real Estate Regulatory expected to raise the level of transparency, professionalism and confidence in the housing market and therefore stimulate demand in the coming months.

Research Objectives

Looking ahead, the problem for the real estate sector of Dubai is the fact that on one hand, the Dubai property market is still very young and the other, the magnitude of the economic crisis is unlike anything in ...