The past year has become a landmark for Dubai real estate. Why? He was rich in important, major events, which, according to experts, for a long time will provide a stable and lively interest of investors in Dubai real estate. After the global financial crisis and the fall caused by it, and then the stagnation of prices, it was 2012 that brought a noticeable revival to the Dubai market. He will be remembered for the rise in property and rental prices, the launch of new large-scale projects, the rapid inflow of capital, and the active interest of investors. All this, in turn, entailed unprecedented regulatory measures by the UAE authorities aimed at making the market more transparent and ensuring the security of its participants. We’ll try to highlight five key events in the cycle of events in 2012 that determined Dubai’s place as one of the most attractive, according to experts, markets for investors in the new year.
FIRST. REVIVAL IN THE MARKET. GROWTH OF REAL ESTATE PRICES. VILLAS PRICE FASTER THAN APARTMENTS
Experts unanimously stated the rapid growth of the Dubai real estate market in 2012. According to leading consulting companies, on average in 2012, prices for villas in Dubai increased by 20%, and for apartments in the region of 510%. At the prestigious Downtown Dubai, prices for the last quarter of 2012 rose 10%. And this is no accident, because the price increase in the more popular and well-located areas of Dubai was on average higher than in lower-class projects. Although there are exceptions among them: for example, in the Silicon Oasis area, prices have partially increased by 40% and, according to experts, will continue to grow due to high demand from middle-income buyers. Among wealthy investors, the most popular villas in the "classic" areas of Dubai - The Palm Jumeirah, Meadows and Emirates Hills. Rising prices for them next year are expected to be at a high level.
The greater interest of investors in villas compared to apartments has become one of the main distinguishing features of the past year. It is in the segment of villas that prices have already won back all the losses of the post-crisis years and exceeded the level of successful 200708. The popularity of villas makes them highly liquid goods, which also contributes to the interest of investors and rising prices for them.
As for the rental of residential real estate, in 2013 it is highly likely to rise in price in such areas of Dubai as Downtown Dubai, Dubai Marina and The Palm Jumeirah. In less popular areas of Dubai, according to the forecasts of the consulting company Jones Lang LaSalle, rental rates will not increase. Nevertheless, in the medium term, the rising cost of housing will be promoted by the rapid growth of the population of Dubai and the limited supply of housing. The resumption of the flow of wealthy expats, supported by high business activity, creates a steady demand for rental housing from the upper segments of the market, while its supply is physically unable to grow at the same pace.
In the next two years, Dubai's residential property market will replenish with 45 thousand new apartments and villas, but most of them will be located in new so far less developed areas such as Jumeirah Village, Dubai Sports City and Dubai Silicon Oasis. Despite the fact that in popular areas, like Dubai Marina, there is almost no free space for development.
SECOND. GROWING TRUST FROM INVESTORS, INFLUENCE OF CAPITAL
As noted above, experts portend Dubai's real estate market to become one of the most dynamic in the world in 2013. This is facilitated by the rapid growth of the emirate's economy and business activity. So, the growth rate of Dubai's GDP in 2012 was revised upwards to the level of 5% per year. At the same time, the economic indicators of Dubai indicate the absence of a significant increase in debt and a decrease in the risk of default. According to the Dubai Statistics Center research center, the number of people coming to Dubai in 2013 will increase by 10%. The Bank of America / Merrill Lynch report predicts an increase in the number of tourists by 2020 to 15 million annually, compared with 8 million in 2011.
The turbulent events that took place in a number of countries in the Middle East in 2012 confirmed the status of Dubai as a "safe haven" for investors from all over the region. In addition to capital from the Persian Gulf and other Arab states, Dubai has traditionally attracted wealthy investors from India, Pakistan and other growing Asian countries. The growth of investor confidence was perhaps the main result of 2012.
According to a study by Friends Provident International, 60% of wealthy expats living in the UAE are confident in the continued growth of the real estate market. Most of them (49%) believe in "strong" growth over the next 5 years, another 11% expect "very strong" growth in this period. Only 10% of respondents felt that the UAE real estate market in the future will encounter certain difficulties.
THIRD. RETURN OF MEGA PROJECTS
In the last quarter of 2012, Dubai announced the launch of a number of major projects, reminiscent of the times of the pre-crisis boom in the real estate market. It all started with Cityscape Global 2012, at which Link Global Group announced plans to create Taj Arabia - an enlarged copy of the famous Indian TajMahal temple - worth US $ 1 billion. Sobha Group unveiled plans to build the entire city of Sobha City in the Meydan area, which includes 280 villas, 13 high-rise buildings, a shopping center, hotels and international schools.
Soon after, the government of Dubai seized the baton from private developers. Initially, a project was announced to expand the artificial bay Business Bay, which will be directly connected to the Persian Gulf via Sheikh Zayed Highway and the vicinity of Safa Park. However, the news about the creation of the large-scale Muhamed bin Rashid City complex with the largest shopping center in the world (more than the current The Dubai Mall), a park one third more than HydePark in London, and more than 100 hotels, became a real information bomb. After that, the multi-billion dollar project to create five theme amusement parks in Jebel Ali, each of which will be devoted to a separate topic - movies, animals, funny characters or the Indian "dream factory" - Bollywood, was no longer surprising.
Against this background, other large-scale projects were almost lost. For example, an attempt to repeat the success of Dubai Marina and Jumerah Beach Residence in another part of Dubai - Deira. The Deira Waterfront Development Project on the Persian Gulf, according to the plan of the Dubai authorities, will become one of the main attractions of the emirate. On the four-kilometer strip of the coast between Dubai Creek and Hamriya, six hotels, residential and commercial buildings, a promenade and an artificial bay with a marina will be built. The Maritime City project received a new impetus, where it announced the 230-meter project The Landmark Tower with a five-star hotel.
FOURTH. NEW REGULATORY MEASURES
Along with the revival in Dubai, there were fears that speculators would once again warm up the market and lead to a painful collapse, as it was on the eve of the global economic crisis. The double-digit growth rates in real estate prices each month ended in collapse and prolonged stagnation, so the Dubai government this time is doing everything to make the market not only profitable, but also stable and predictable for investors.
The developers themselves are also interested in this. For example, the largest developers Emaar and Nakheel simultaneously imposed restrictions on the resale of real estate under construction, requiring for this payment at least 35% of the cost of housing in their projects. It is believed that it was speculative resale of housing at the construction stage, because of which it could change owners a few days after the start of sales, became one of the reasons for the “bubble” of prices in the market before the crisis.
In June 2012, the Dubai authorities promulgated a draft law on the protection of investors, which guarantees them full monetary compensation in case of failure by the development company to fulfill its obligations, for example, failure to deliver the property within the stated time period or an uncoordinated change in its characteristics. In addition, under the new rules of the Dubai Land Department, developers will pay a penalty for the delay in issuing a certificate of ownership. Thus, construction companies will have to pay a fine of 10 thousand dirhams (US $ 2.7 thousand) if they do not issue a document confirming ownership to the property buyer when the degree of readiness of the project reaches 80%. Dubai is also preparing to create a special arbitration tribunal that will allow faster and cheaper resolution of conflicts in real estate compared to ordinary courts.
FIFTH. INTRODUCTION OF MORTGAGE LIMITS
However, at the very end of 2012, there were reports of another decision by the UAE authorities, which easily overshadows all the previous ones in terms of their potential impact on the development of the real estate market for years to come. On New Year's Eve, various emirate media reported, citing banking sources, that the UAE Central Bank had sent a circular to all commercial banks prohibiting more than 50% of the cost of housing from expats to mortgages. For UAE citizens, a similar restriction was set at 70%, and for the second and subsequent purchase of real estate - 60% (for expats - only 40%). It should be noted that earlier in the UAE there were no restrictions on the share of the cost of housing that the lender could receive from the bank as a mortgage. In practice, it reached 7580% after banks began to soften their credit policy due to the revival in the market.
Soon, the Central Bank denied information about the distribution of such a circular, but said that the preparation of comprehensive mortgage lending rules is underway and that they can be enforced in 2013 after consultation with commercial banks. Prior to its refutation, this news managed to cause a storm of conflicting reactions on the UAE real estate market. While buyers and banks were outraged by the sudden imposition of restrictions, major developers supported them, saying that this would strengthen the real estate market and encourage the arrival of serious buyers. Analysts are also divided into those who believe that the “ceiling” of mortgages unnecessarily limits the growth potential of the UAE real estate market, and those who welcome greater market predictability and stability. Be that as it may, it can be concluded that the UAE authorities made a firm choice in favor of restricting speculation in the market and combating overdue mortgage loans of commercial banks, even if for this you have to agree to a slower market growth in the short term.
COMMENT BY ARTHUR KOBOZEV, EXECUTIVE DIRECTOR OF IMEX REAL ESTATE:
“The transition of the real estate market in Dubai and all its players to the recovery phase after the crisis took place gradually, and therefore is invisible to many outside observers. Yesterday they argued about whether the current recovery can be considered serious, and today they are already competing in favorable forecasts for the future. Therefore it is very good that the government of Dubai resolutely and unequivocally made it clear to everyone that it would not allow the anarchy that was happening on the market on the eve of the crisis, when the same property could literally change ownership Each week, each time increasing in price, it is unlikely that measures taken by regulatory authorities will be able to scare off real investors - the expectations from the emirate's real estate market in 2013 are too high.
In my opinion, the economic recovery of Dubai and the growth of business activity portend that this year will be no less favorable and rich in positive events than the past. "
You can get any additional information about the acquisition and management of your property in Dubai from the specialists of IMEX Real Estate by tel. in Moscow +7 495 5100008, toll-free number in the UAE 800IMEX (8004639) or by sending a request by e-mail [email protected].
