Dubai: Arabian Dreams
Think about the future – that seems to be the mantra for those involved in the Dubai property market. Whether you’re on the buying or supplying side of the equation, real estate deals are always geared towards an outcome that’s some way in the future. But when a city has the intention of becoming a world-class destination for sport, commerce and property within the next 10 years, and is wagering an estimated £200 billion on its success, you’re dealing with something on a whole different level.
“Very simply, the Dubai government has set out to build the cleanest, safest and most exciting place in the world to live,” says Sam Hadfield of Dubai Select. “Not only is Dubai the Emirate’s flourishing commercial centre but it’s becoming a magnet for tourists and for those seeking a luxurious, prosperous lifestyle.” The ambition and planning behind the endeavour is, to put it mildly, astonishing. A mere 35 square kilometres in size, it’s only taken half a generation for Dubai to be transformed from stopover destination to futuristic cityscape. Anywhere striving to become the 21st-century city par excellence needs a few iconic landmarks and, in Dubai, architectural grandstanding isn’t in short supply. The wave-sculpted Jumeriah Beach and sail-inspired Burj Al-Arab hotels on the waterfront are already seeing booming business, and the Burj Dubai tower is set to be the world’s tallest building when completed. Meanwhile, all the leisure facilities to attract executive travellers have been factored in. Dubai holds the world’s richest horse race, stages international golf and tennis events and even has plans for formula one racing – and all that’s in addition to a shopping mall the size of 50 football fields and three theme parks!
Beyond belief
“Almost every development project that’s underway in Dubai has caught the public’s imagination, sometimes even their disbelief!”says Gary Falk of IFA Hotels and Resorts. Indeed, what to many would seem like fantasy or science fiction – an underwater hotel, a ski-resort in the desert – doesn’t even make the typical Dubai developer think twice. If there’s any philosophy behind the growth of Dubai, it would seem to be that old chestnut, ‘build it and they will come’ – oh, and they’ll invest heavily too.
Certainly the figures show plenty of fresh interest. “Dubai’s population has expanded by an annual average of 9.8 per cent over the last five years,” explains Brian Scudder, communications director of Oryx Real Estate. “And there are no signs of this slowing – last year as many as 250,000 people came live in Dubai.” This sudden explosion in popularity isn’t just thanks to the remarkable range of properties available and their relatively low cost – changes in Dubai law have helped, as Mr Falk outlines. “In 2001, the Dubai government began to allow expats to acquire
99-year leaseholds in property. This was followed in May 2002, when the crown prince, Sheikh Mohammed bin Rashid Al Maktoom, issued a decree that allowed foreigners freehold ownership. This was what really sparked Dubai’s residential real estate boom.”
Tourist numbers have blossomed too. “Dubai no longer has a quiet season,” admits Mr Falk. “During July and August a number of expatriates leave for their vacations and to escape the soaring temperatures. Yet tourism is still very high – most hotels operate at around 90% occupancy throughout the summer months.” By far the busiest time of year is the November to March period, when the climate is warm but not overbearing and the international sporting events and shopping festival are held.
Arabian heights
“Dubai is host to some of the most ambitious and famous projects in the world,” says Mr Hadfield, “that’s what makes it stand out from the rest of the emerging property markets.” For many, this sums up the appeal. Buying a second home in Dubai allows you to enjoy a sky-high standard of life in a location that has gained widespread fame. Within seven hours you can swap rain-swept London for a top-notch apartment on Dubai Marina, trading English anonymity for sun-drenched glamour.
Much press attention has been garnered on the real showpiece developments, all three of them offshore. The Palm Islands – namely Jumeriah and Jebel Ali – have grabbed the majority of coverage. Two manmade islands that stretch into the gulf, crafted in the shape of palm trees, they feature some of Dubai’s most desirable homes. Properties on the main ‘trunk’ of Jumeriah sold out in record time on their 2004 release but re-sales have quickly appeared on the market, albeit at highly inflated prices. Almost as media exposed is The World, a series of 300 islands that form a map of the Earth and stand eight kilometres from the coast – individual ‘countries’ are up for grabs, all for premium sums.
That’s not to say Dubai need be a particularly costly place for high-standard property. One-bedroom apartments on the major developments still start from around £120,000 (AED 770,200), two-beds from roughly £250,000 (AED 1,605,000) – though there are huge variations, depending on specific location and facilities. The re-sales show obvious mark-ups from initial prices but, unless nothing but a waterfront penthouse will do, it would be a real feat to spend over £900,000 (AED 5,777,300), even on a family home. As an example, a garden home on the Palm, Jebel Ali, is on sale from the Dubai Property Centre for just over £500,000 (AED 3,207,000). Not bad at all for a four-bed with private garden, pool and beach on one of the most famous landmarks of the 21st century!
All our leading agents agree that waterfront property is currently at a premium. “The Dubai Waterfront Project is one of the most impressive additions to the city,” says Mr Falk. “It’s located on the last remaining coastal waterfront in the Emirate and will feature well over 100 waterfront developments and more than 150 master planned communities and investment opportunities.” Once this sees completion, almost every waterfront unit in the region will become even more sought after, and prices will rise still further. Mr Hadfield concurs – “I’d say the residential marina developments are by far the most interesting to investors – it’s largely to do with the nature and location of the builds and the available finance options. Also, anything waterfront can be rented at a premium to holidaymakers.”
The Dubai Marina is singled out by Mr Scudder but for another reason. “Dubai Marina is the hottest selling area at the moment, and this is to a large extent because it’s tangible. The properties are similar to those in Emaar’s towers, places that have been lived in since 2003. At Emaar’s development the build quality is excellent, there’s a real community spirit and the facilities are top notch. To my mind, this puts any off-plan investment on a firm footing. If you can get a feel of what your home is going to be like because there are similar projects in the vicinity then you’re on to a winner.”
Somewhat unsurprisingly, the leading agents all think that investing in Dubai can bring both satisfaction and healthy profit. As Mr Scudder puts it, “There are two ways of looking at location in Dubai. Some want to buy extremely high-end homes now at extremely good prices that will rent with the minimum of fuss in exclusive developments. Others are more than happy to buy multiple units in cheaper developments – and look at the volume of rent over time. Either way, it is all about portfolio management and getting the right advice.” There’s been an average increase in property values of more than 20 per cent in the past two years and all predictions point to steady and continual rises. “You should see it as a medium to long-term investment,” says Mr Falk. “Demand for quality residential property has risen – with buyers coming from the UK, Ireland, the Subcontinent and beyond – and that’s had a real effect on values.”
For those planning to inhabit their property part-time, Mr Scudder points to the formidable buy-to-let market. At the moment, there’s a strong demand from would-be renters that simply can’t be met. “There won’t be a supply-demand balance for at least the next five years – probably long beyond that,” he remarks. “This can mean it’s worth taking advantage of very reasonable rates for off-plan units, safe in the knowledge that when they come to complete, there will be a burgeoning rental market to make money from. Capital appreciation and strong rental value? Surely that’s got to be good!”
Rental yields are currently averaging nine per cent (or three times those in Western Europe) but are set to increase further, thanks to a quirk particular to Dubai. “In most markets when property prices rise, yields fall. But in Dubai house prices are rising at roughly the same rate as rents – around 40 per cent in the last two years, because of resident inflows. This suggests that yield will continue to be strong for years to come.”
As for off-plan projects with good prospects for long-term rentals and appreciation, our agents suggest Bayside Residences, MarinaScape, Oryx Marina Tower (all three in Dubai Marina), International City, Arabian Ranches and the Palm developments.
Any summation on Dubai is – like the city – very much a work in progress. As Mr Hadfield puts it, “Although Dubai has transformed over the last few years, as a project it is still far from completion.” After all, if this is just the first phase, think of the wonders we can expect in Dubai once the developers really get into their stride…
Source: International Homes