Dubai property gets hotter than ever

To see 300 would-be property owners queuing in the summer sun for the chance to buy an apartment in The Greens suggests that the Dubai property boom is still very much alive and well. Indeed, predictions that the boom might go bust this year now look frankly ridiculous.

However, it is useful to analyze the profile of these buyers. Certainly these were not all owner-occupiers. Some looked to be clearly speculators whose multiple purchases will quickly find their way back on to the re-sale market, albeit at a slightly higher price.

This is the way property markets work. But in Dubai the ones next in line to make serious money may not be the traders.

For as a real estate market matures, and Dubai's market is maturing very quickly, it is the people who hold on to property that win hands down. And many traders are already beginning to realize that a more long-term perspective might be a good idea.

Just do the sums. The yield on The Greens apartments is 8-9% and the cost of local mortgage funds 6.5%, so an apartment virtually pays for itself from Day One, aside from a deposit or equity payment, typically 20-30%.

Now over time this yield will tend to grow due either to rising rents, or property price rises.

What could cause the rent to rise? Booming demand for completed property from new expatriates is the obvious answer. And with the UAE economy set to rocket on huge oil revenues and diversification plans with massive inward investment that seems assured.

And why should property prices go up? Well, apart from demand, the finalization of a new Dubai Property Law in the near future should bring many more mortgage companies into the market increasing the amount of money available for investment. At the moment Dubai is mainly a cash market, and so prices are lower than in other global property markets.

These considerations may not reduce the speculative element in Dubai real estate - and all real estate markets have their speculators to drive the market - but it might make investors think a little more long term.

In fact, local agents report a surge in serious investment interest from overseas. One agent told AME Info last week that a client in the UK had liquidated a $60 million portfolio and was investing the whole sum in Dubai.

This is a classic sign of the smart money moving from one hot market to another. Interestingly this investor will look to hold for at least three to five years before moving on. That could be a lesson for the traders who will live to regret passing on an apartment for a Dhs20,000 premium.