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I n 2015 Dubai demonstrated the strength of its economic diversification model. The impact of falling oil prices was cushioned effectively by the city’s visionary goals for the medium and long term.
It is against this backdrop that the property sector of Dubai has to be reviewed as we enter a new year. The UAE’s GDP is projected to grow 3-3.5 per cent this year, highlighting the strength of the national economy, and the defining character of Dubai’s property sector last year was the predominant sense of maturity it displayed.
No short-term gains
The regulations enforced by the authorities and strict policies followed by responsible developers have virtually stalled the practice of flipping to make short-term gains. In this mature and more responsible scenario, property demand was principally led by long-term investment objectives — both as secure investments and for live-in purposes.
The domestic property demand was also spurred by strong interest from international buyers. More than 132 nationalities bought property in Dubai with investors coming from India, Pakistan, the UK, Canada, Russia, China, the US and France in the list of overseas investors. A number of leading developers organised roadshows in these key markets to drive investor interest. The international investor demand was also spiked by Dubai’s reputation as a smart, safe and secure haven for investments. Demand also came from new feeder markets, especially in Africa and South Asia, which stood to benefit from lower commodity prices last year that contributed to internal growth.
While several high-end projects have been launched in Dubai this year, especially in the run-up to the World Expo 2020 in Dubai, a notable shift that happened in the residential property sector of the city is the emergence of affordable communities.
This is a big step forward for Dubai. After nearly a decade since the issuance of the Freehold Law, Dubai now offers effortless opportunity for the middle-income segment to buy into homes that will enable them to move out of the rental spiral.
The rise of affordable communities will be a defining trend in the coming years for Dubai’s property sector, which will also see the successful roll-out of trendy master-planned communities. However, the success of both segments will depend on how they differentiate themselves in their value offering. This value offering includes the choice of location, amenities offered and a greater emphasis on connectivity and mobility. A tangible proof on how connectivity is a driving force in shaping the fortunes of master-planned communities — as well as in deciding rental values — is the Dubai Metro. Areas serviced by the Metro have seen stable rates.
Dubai’s property sector has also benefited from the city’s reputation as a tourism and business hub. This is particularly pronounced in the serviced residences segment. With the option to enter their homes into a rental pool, many international investors are attracted by the prospects of short-haul stays and long-term returns that accrue by investing in serviced residences.
The New Year will see new projects entering the supply pipeline, but mostly in the luxury bracket. Under current demand trends, this could have a potential impact on price in general. A smarter property sector is predicted this year, which means investors will continue to undertake due diligence.
However, given current enquiry trends, established communities are unlikely to be impacted adversely because developments such as Downtown Dubai continue to be much sought-after for their central location and lifestyle amenities. Overall, 2015 was, therefore, a year of consolidation for Dubai’s property sector. And 2016, given the global sentiment, might not offer any drastic surprises. Market maturity and stability, after all, are what define the long-term prospects of any property market. Dubai has proved it has both.
Looking back: 2015... the future never looked brighter
Source: Ranju Kapoor, Special to Property Weekly
General Manager of Hamptons International, a full-service property company
Al Nisr Publishing accepts no liability for the views or opinions expressed in this column, or for the consequences of any actions taken on the basis of the information provided.