- Broker Directory
- My Tools
- News & Advice
- Market Trends
- Other GN Sites
In the backdrop of an eventful year of strong market performance and the Expo 2020 win, Dubai is entering the new year with enormous positive sentiment. The outlook for 2014 is very positive as property prices are expected to maintain their upward trend, with more launches slated for the next 12 months or so. Dubai's property market has been seeing a strong growth trajectory, which experts believe will prevail even in 2014, and will continue until 2020 at the least. Dubai received a further boost due to the World Expo 2020 bid win - an event that will host 20 million tourists annually and create 277,000 jobs.
''Given that Dubai has won the rights to host the World Expo in 2020, the outlook for the property market is very positive. Although the Expo is still six years away, we will see a raft of new projects launched, developments completed to improve the infrastructure, and possibly old favourites relaunched,'' says Mario Volpi, Managing Director, Prestige Real Estate Dubai. In terms of the Middle East, he says, there is no doubt that Dubai will be the best performing market; it presently has no equal - not even Doha, Qatar comes close.
Several industry reports published recently are also echoing similar sentiments. Fitch Ratings, for instance, says Dubai's prime property sector is set up for a strong 2014 following a vibrant 2013, and its successful bid for the 2020 World Expo should generate activity and boost confidence across the emirate's infrastructure, real estate and hospitality sectors over the next few years. ''Dubai is expecting 25 million visitors to the Expo, which will drive major new construction projects across a 438-hectare site and significant infrastructure upgrades. This activity should continue to support rents and real estate prices in the run-up to the event, as well as boosting the construction sector. It will also boost demand in the hospitality sector, helping balance the likely revival of other tourist markets in the region as political stability improves,'' says Fitch Ratings.
But it's not just the win that is working in Dubai's favour, 2013 has been a good year for most developers, who saw not only demands for quality projects growing but also prices climbing high to boost their confidence. ''Dubai's property market was experiencing a strong resurgence even before the announcement that it would host the World Expo in 2020, and this - one of Dubai's greatest achievements-will only enhance the prospects,'' says Niall McLoughlin, Senior Vice-President, Damac Properties. ''The World Expo 2020 will showcase Dubai's unparalleled growth and confirm its place as a world leader. The impact of the Expo 2020 will have a hugely positive effect on generations of Emiratis to come.'' He acknowledges that 2013 was a pivotal year for Damac as the Dubai real estate market continues to strengthen. ''The launch of Akoya by Damac - a 42-million-square foot golf and lifestyle community - as the largest single development the company has ever launched. The response to the luxury living villas and apartments around the Trump International Golf Course has been strong and our customer base has been quick to respond to the unique lifestyle available in this luxury development,'' says Loughlin. His company had been active in luxury branded living concepts last year, with collaborations announced with luxury global brands Fendi and Paramount.
From the investor's point of view, Dubai's property market will fetch better returns than any other cities in the world this year. According to Knight Frank's Prime Global Forecast, Dubai's real estate market will be the world's top performer in 2014, building on last year's rapid price growth. It predicted price growth of 10-15 per cent in Dubai this year, placing it ahead of other Asian markets such as Beijing (5-10 per cent) and Shanghai (5-10 per cent).
The global property consultant feels that while the last quarter of 2013 might not have seen the kind of growth that its previous three quarters saw, due to the effects of various government measures including the doubling of transfer fees, the prices are expected to increase again in 2014. ''Although there are signs that transaction volumes have fallen back since the introduction of these measures, we suspect that price growth will quicken again in the early part of 2014,'' Knight Frank says.
As already witnessed, real estate prices in prime areas in Dubai had risen by up to 30 per cent last year. Dubai continues to enjoy the confidence of local, regional and international investors. The instability in other Middle Eastern countries has had a positive impact on Dubai as a major preferred destination in the region. Now, with the Expo win, the property prices have nowhere to go but northwards.
The impact of the Expo win will be felt across segments - with luxury villas, service apartments, retails and hospitality expected to see greater demand due to increased in1low of tourists and expats. According to CBRE estimates, over the next three years alone 14,000 new hotel keys and nearly 5,000 hotel apartments could be delivered, adding capacity for a further seven million room nights a year to Dubai's annual room inventory. With the win, this pipeline of additional rooms would undoubtedly swell much further. Damac, for example, has already completed its first serviced hotel apartments project, the Summit, which will be managed by its hospitality division, Damac Maison. ''We see the main areas of strength as luxury serviced hotel apartments, especially branded projects in the Burj area of Dubai, and also luxury villa concepts. On the back of Expo 2020, and the anticipated increase in tourism, the demand for serviced living concepts in key locations is going to be key,'' says Loughlin.
Besides hospitality, there would also be a direct impact on the retail sector, which would see a rising retail spend leading up to and during the event. With current retail space of around 2.2 million square metres, some of the largest malls here are planning expansions, including the Dubai Mall, Ibn Battuta and the Mall of the Emirates. According to CBRE's recent research on shopping centre development, Dubai has approximately 0.5 million square metres of shopping centre space already under construction. ''Dubai is second only to London in terms of the number of brands on the high street - by 2020 Dubai may actually overtake London as the most diverse and comprehensive shopping destination in the world,'' says Mat Green, Head of Research & Consultancy UAE, CBRE Middle East.
But it's not just luxury and hospitality. Experts believe all other segments will also perform well in 2014. ''Due to the positive sentiment I cannot see any one segment necessarily outperforming another. Residential markets are well on their way through a property recovery cycle. Commercially, things are at the beginning of an upward curve. Families will naturally gravitate to villas and smaller families and individuals would be attracted to apartments. Dubai is all about luxury but I think that the key to keep this fantastic city of ours going strong would be to have some elements of lower-cost housing too,'' says Volpi.
2014 might throw up the fear of another property bubble due to overheating of property prices. The main reason for this concern among the ordinary man is the Expo 2020 win, which might cause further pressure on already inflated real estate prices. ''Unfortunately, the trend for property prices will continue on the up, however, it is the rate of increase that worries me,'' cautions Volpi. ''If prices continue their climb at the current rate, I do fear we will be heading for a correction whilst this is not necessarily a bad thing, I worry that the government, in their quest to slow the market, may give too high a dose of medicine and we then may get a market that has sellers but no buyers.''
Though fast-escalating residential prices are a matter of concern, analysts also say there is no need to panic as the government has already put in a number of safeguards, and prices are still below the 2008 level. ''Dubai apartment and villa sales prices have yet to reach the peak levels last seen in 2008 and are still 42 per cent lower than in the third quarter of 2008, while year-on-year growth amounted to 42 per cent and 26 per cent, respectively,'' says John Stevens, Managing Director, Asteco.
Asteco believes that although prices will increase further, they are unlikely to go back to the levels experienced during boom times in the short/medium term. ''In the medium to long term, the supply of residential units to the market is considered as strong, which will cater for the increased demand from incoming expats into the city,'' be adds.
However, experts also say whilst a short-term spike seems inevitable, the growth levels will stabilize quickly once the celebrations subside, although ultimately prices will continue to increase. Also, price rise is linked to supply in the market. Dubai is currently building around 40,000 new residential units which are to be delivered by the end of 2016. '''Normally in a market of this size, this level of supply would be sufficient to keep inflation in check, but in Dubai, growth is also being driven strongly by speculation rather than just supply and demand,'' says Green. He says much of the new product will be delivered in secondary areas, meaning little pressure will be released in core expatriate markets such as Emirates Living, Palm Jumeirah, Dubai Marina, JLT and Downtown.
The rental market is expected to get a boost this year and will continue until the Expo. With an expected increase in population in the region of three million projected by 2020, these new people will rent to start off with, so there will be plenty of people looking to live in rented accommodation. ''We expect rental growth to continue in a sustainable fashion as economic improvement fuels internal demand as well as resulting in new expatriate arrivals into the UAE,'' says Stevens.
But the fear of escalating rental price in 2014 will be hurting tenants who feel an inflow of more expats into the region will eventually propel landlords to go for upward revisions. ''The rental prices will continue to look upwards but I do not see this to be an ever-increasing phenomenon though. The new rental decree has raised some eyebrows among tenants as most landlords have been given the green light to raise their rent further (providing the Rera rent calculator allows this). If rents go too high, properties will soon become empty and tenants will look at cheaper areas or smaller properties,'' says Volpi.
Since less people are having their rent paid for by their employers, they will have to negotiate better.
This year might also see more measures from the government to avoid any bubble like situation. Last year, the government took some stem measures for curbing the flippers of off-plan re-sales. ''The government had introduced regulation to more closely control the Dubai real estate market, including the regulation of all off-plan sales, the introduction of permits before sale, and mandatory payment of 20 per cent before construction. This has led to higher barriers to entry into the Dubai residential sector,'' says Loughlin.
Though the industry applauds the government's measures, many feel that some of the measures could have helped the end users more, by not taking a one size-fits-all approach, such as the recent mortgage caps. However, the industry understands that new regulations in the Dubai property market will ensure there will be no more boom and bust; just a more consistent growth pattern. ''The government is all-watching and all-seeing. It will not hesitate to bring in other measures to curtail the level of property price increases. It does not want Dubai to out-price itself and will do all it can to stop this from happening,'' says Volpi.
The streets are already abuzz with the rumour that the cost of transferring property may go up again. ''Whilst this has been denied by the Land Department, I believe that it may consider this as an option, but with all the new projects coming on stream in the near future any further transfer fee increases could be targeted to off-plan sales only,'' adds Volpi.
Loughlin says that it was also recently revealed that the Dubai Land Department is in the process of issuing a number of new legislations to further regulate the real estate market over the next two years. ''This is instilling further confidence in the market in the coming years,'' he says.
The property market is often driven by the sentiment, which is presently on a high due to Dubai's remarkable resurgence over the last one year or so. The emirate's overall economy is now much stronger and in better shape for the future - giving a boost to sectors such as tourism, retail and manufacturing. Now, with the Expo 2020 win, the city has found a new euphoria.
Source: Syed Ameen Kader, Special to Property Weekly