Commendably fast publication of 2006 data by the Dubai Land Department has shown that real estate transactions hit a new peak of $17.8 billion, up by 88 per cent on 2005.
Further analysis of this data reveals a marked swing by investors away from residential buildings towards office towers, with a preference for completed units to maximize the return on investment.
This shift was seen in land purchases as well with $3 billion in commercial land sales, and just $1.2 billion in residential land sales. It is probably not surprising to observers to see the trends already noted in the market confirmed by these provisional figures which are subject to later revision.
However, the Dubai Land Department has made some major strides in recent years, and has one of the most advanced computerized land registers in the world which enables the rapid presentation of statistics. This enables investors to make the best informed decisions in a more transparent market.
The multi-billion dollar question now, of course, is where will investors shift their funds next? Will there be renewed interest in the offshore residential projects with the delivery of the Palm Jumeirah, or will this put investors off such projects?
And will investors in real estate now start to cash out of some of the remarkable returns in commercial property? Rentals on commercial property have quadrupled in many districts of Dubai over the past few years, and some investors may reason that this must represent a peak in the market and a sell signal.
One phenomenon that can be anticipated is the sale of property in the Dubai Marina as the 100 plus towers under construction are actually completed. Some original investors will be looking for an exit on completion of the property, and to realize a profit, while owner-occupiers will be taking up mortgages to acquire these units.
Certainly a surge in business for the Dubai Lands Department can be predicted in terms of new property registrations and a turnover of this vast new inventory. For the volume of real estate coming up for delivery is on a massive scale with around 200,000 units due within a few years, according to the market consensus of forecasts.
Delays to supply
Of course it is the exact timing of delivery of this huge flow of property that will determine the supply and demand position this year and next. But it would be very unusual if the creation of such an inventory of property was not accompanied by an upsurge in both buying and selling of property.
Perhaps then the new regulations announced last week by the Dubai Government to police the real estate agency sector are timely as this booming industry could be about to get very much bigger.
On the other hand, if the property market is about to undergo a correction, as many experts predict, then a period of lower transaction levels could be expected – with the market stalling before price levels moved lower. But we have not seen this yet, except in that some real estate is more favored by investors than the alternatives, particularly commercial property.