A Short History of Dubai Property: Part 5

AME Info explained: 'There is a large oversupply of property of certain types - mainly middle to up-market apartments - due in 2007, and this is almost certain to lower rentals and at the very least keep nominal Dubai property prices contained at present levels.

'For somebody intending to make Dubai their long-term home then buying is down to three factors: saving on rent; using a house as a savings policy; and the pleasure of being able to do what you want with your own home, subject only to planning constraints.'

Indeed the waning investment case for Dubai property was underlined by a new house price index published in early 2006 from the Investment Boutique modeled on the UK's well respected Halifax House Price. It showed that 2005 was a tale of two markets, with villas performing substantially better than apartments.

Villas outperform

In fact, the average price per square foot of a Dubai villa improved by 31 per cent over the 12 month period. But the the average price of apartments fell by 10 per cent in the first half of 2005, and then rebounded back in the second half, to close pretty much exactly where it started.

However, 2006 was not a bad year for Dubai real estate as it turned out. Delays in the delivery of new projects continued to push back the date of likely oversupply, and the long-awaited Dubai Property Law was finally decreed.

This meant that for the first time foreigners could register properties under own names in the Dubai Land Department. And if the latter conjures up images of Dickensian title deeds think again; this department offers the very latest in electronic land and property title registration.

As AME Info noted, 'Previously buyers held a contract of sale from the developer which allowed transfer of ownership only through the developer, with an agreement in the contract that a full and unencumbered freehold title would be granted on the property as soon as it became available.

Indeed, the biggest practical impact may be felt in the local mortgage market rather than the re-sale market.'

Construction delays

But in the spring of 2006 the biggest factor in the local property market was a shortage of completed property and longer and longer construction delays.

As we pointed out: 'A brief glance through the ever-thick pages of the Gulf News property sections, and there are three of them, confirms that price levels are up in 2006. If you look at apartments in The Greens or villas in The Meadows you will find that 10 per cent is about the going rate of house price inflation so far this year.

'How can this be explained? Well we are looking at completed property, available for occupation, and not one of the many towers emerging from the ground in the Dubai Marina and Jumeirah Lake Towers district.

'Yields on Dubai villas of 7.5 per cent compare very favorably with 2-3 per cent available in more mature markets like the UK, and are therefore attractive to investors who will drive prices higher and rental returns downwards.'

See also:

A Short History of Dubai Property: Part 4

A Short History of Dubai Property: Part 3

A Short History of Dubai Property: Part 2

A Short History of Dubai Property: Part 1