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The emirate is now firmly back into the swing of a bull market. With the memory of the crisis still fresh in everyone’s memory, many are asking ‘Is this another bubble’? Whilst I cannot predict the future, my answer is a firm ‘No’!
The market is currently growing in a much more mature way. The crisis was Dubai’s first recession since hitting the big time in the early years of the century. It just happened to be the worst global recession in close to a hundred years. Whilst caution is always advised in any investment, we should all be careful of being too fearful of what was most likely a once-in-a-lifetime global event.
Markets all over the world are cyclical, both in property and the broader financial markets, and we are now in the upswing of a natural cycle. Of course, there will be corrections and periods of slower growth in the future, but these are just natural and healthy fluctuations.
The highest transaction price in prime property in Downtown Dubai is now close to Dh5,500 per sq.ft. according to Reidin data. This may seem an incredibly high figure when just looking at the Dubai market in historical terms. However, when one considers that in November 2013, a transaction completed in Hong Kong at close to Dh34,000 per sq.ft. (JLL Public Auction Report), and the UK Knight Frank Prime Central London Report states that the transactional average for December 2013 was Dh37,249 per sq.ft. (GBP 6,000), these prices no longer seem so high.
Even comparing another tax-efficient jurisdiction such as Geneva, Switzerland, average prices are currently Dh10,300 per sq.ft. for Q4 2013 (JLL Geneva Office Profile) – close to double the prime market in Dubai.
So it can be seen by these recent transactions around the world that prime Dubai property is currently transacting at only 15% of major world cities such as Hong Kong and London, and at only 50% of a second tier city such as Geneva.
So, can I guarantee that prices are going higher? No. But based on these simple international comparables, the potential ceiling is significantly higher than it is now, and it can even be argued that Dubai is underpriced on a global level.
• Markets around the world are cyclical in a broad financial sense, including property
• The highest transaction price in prime property is now close to Dh5,500 per sq.ft.
• Price of prime property in Dubai lower compared to other global locations
Source: Richard Shearer, Special to Properties
The writer is Managing Director, FAM Properties