As the financial crisis gripped the world, the property market took a nosedive – even in the UAE. After years of laying exposed and vulnerable, there are now stable signs of recovery. By Vineetha Menon
Cityscape Global wrapped up a successful edition in Dubai this week, with many encouraging new projects announced. All good news from a commercial perspective, but Aficionado spoke to the experts to find out just how residential luxury real estate in Dubai is faring.
In 2008, sales of ultra-luxury properties in the region were indeed affected by the crisis because, while there’s no doubt the rich could still afford it, some remained hesitant to invest in countries that seemed unstable. Niraj Masand, head of operations at real estate agents Hamptons MENA, a wholy owned subsidiary of Emaar Properties, believes the sector only escaped significant impact because investors in these properties were “not relying on the availability of mortgage financing, and normally looking to capitalise on depressed property prices to bolster their assets.”
“Prior to the crash, the market was not a proper estate agency market but more of a commodities market. People were buying properties to flip and resell, to make 10 per cent profit overnight,” adds Mario Volpi, head of residential sales and leasing at Cluttons, a property consultant and estate agent firm that has been trading in Dubai since 1976.
Volpi reveals that “property prices fell as much as 50 per cent to 60 per cent from the peak of late 2008”. Average villa prices bottomed from AED1,563 per square foot in 2008 to just AED877 a year later, but rates are now steadily climbing to AED918 this year. That’s good news for investors keen on taking advantage of the relatively low prices.
Government figures reveal that foreign investors bought real estate assets in Dubai worth AED28.3 billion in the first half of 2012, up 36 per cent over last year.
“Due to Dubai’s emergence as a safe zone and the laws providing significant protection to investors, investment in real estate in Dubai is now driven by long-term investors,” Masand adds.
It makes sense. Based on the standards of top international cities, Dubai is still fairly cheap in the wake of its market crash, which makes it attractive to prospective buyers. Especially as Europe faces a reeling debt crisis, India’s stuttering economy is not doing the country any favours and government intervention in property markets across Asia is leaving buyers wary.
Also, the Dubai government is continuing to spend money to improve the city’s infrastructure, trade remains strong and, unlike other Middle Eastern countries, the United Arab Emirates enjoys strong stability.
Demand for commercial property is also higher this year than in the past two years. This is particularly led by the growing investor and business confidence in Dubai, which is now on a growth track.
“Dubai’s high-end real-estate market today has robust demand primarily due to the positioning of the market as safe investment zone, good financial returns and adherence to the highest standards of transparency and corporate governance. Today, RERA and the Dubai Land Department have implemented concrete measures that are guaranteed to boost investor confidence,” explains Masand.
The return of buyer confidence can also be linked to the fact Dubai has matured greatly over the years, learning valuable lessons from the financial crisis. Buyers continue to remain interested in properties in upscale neighbourhoods such as Palm Jumeirah, but are now also increasingly looking at developer reputation and value for money.
“We believe that investors are more prudent about their investments and look for medium- to long-term returns. Investors are interested in properties with developed infrastructure, superior lifestyle offerings, more facilities and better asset management. They are also conscious of the developer and would normally work with established companies whose financial position and brand image precedes them,” adds Masand, who recommends that anyone on the sidelines should seriously consider investing in the city within the next eight to 12 months.
It also helps that the UAE dirham is pegged to the U.S. dollar, which means that it’s protected from the euro crisis. Even if the US faces a tough financial period in the near future, the strength of Gulf economies means that the UAE will still likely be able to spend its way out of a difficult situation.
“Our advice is to not wait too long to come back and buy within the Dubai residential property sector, as prices in some areas are definitely beginning to rise,” explains Volpi. “Dubai still offers the lifestyle we all strive for, especially when all around (US/Europe) are having such a difficult economic time of late. Notwithstanding the conflicts on our doorstep: previously in Libya, Egypt, Yemen and Tunisia and now Syria, Dubai is seen as an oasis of calm that we all look for,” adds Volpi.
Real estate, like any other investment, has risks but Dubai is looking good right now. As long as investors don’t find themselves led by undue speculation or expect distress deals, the city offers prime opportunities to make the most of your money.