Should You Invest?
Dubai has been the hotshot of the UAE for some time now and as a
result is starting lose the shining appeal it once had. Prices are
continuing to rise, prompting fears from some that a bubble may be
on the approach. Between 2003 and 2007 villa prices increased by
226% and apartments rose 100% in the same period. Concerns
are that these prices may be unsustainable and that more
people will follow current trends and move their interest to the
less expensive emirates. Having said that, Dubai is still very high
in the popularity stakes, with around 5,000 people moving to the
city every week, attracted by the tax free opportunities and
construction boom. Air traffic is increasing at an annual rate of
20% with the introduction of more flights, and the construction of
the new super airport will bring even more passengers to the city
following completion.
- Rental caps are set at 7% to try and prevent overheating.
- Strong population growth that could provide enough demand to
meet the burgeoning supply.
- Betwenn 2009 and 2010, 277,000 housing units will be
delivered – could this be too many for the current demand?
- Dubai is an economy that has worked to move away from reliance
on the dwindling oil supplies and is now supported by tourism and
foreign industries.
Rental Yields
According to Globalpropertyguide.com research rents are still
rising in line with prices, with yields varying from 6.5% to
8.5%.
location
type of
property |
size
(m2) |
average
price
to buy
(US$) |
cost per
m2 to buy
(US$) |
average
price
to rent
(US$) |
cost per
m2 to rent
(US$) |
yield
(%) |
Dubai-
Apartments |
|
|
|
|
|
|
| |
50 |
206,400 |
4,128 |
1,755 |
35.1 |
10.20% |
| |
100 |
409,500 |
4,095 |
2,807 |
28.1 |
8.23% |
| |
150 |
605,400 |
4,036 |
3,639 |
24.3 |
7.21% |
| |
200 |
794,800 |
3,974 |
4,638 |
23.2 |
7.00% |
| |
250 |
897,000 |
3,588 |
5,140 |
20.6 |
6.88% |
Source:
Global Property Guide
Price History
Initially, when Dubai started witnessing the beginnings of
construction in the city, responses weren't encouraging. But
following a decision taken by the government in 2002 to change the
nature of foreign property ownership from leasehold to freehold
interest suddenly escalated and a large number of developers became
keen to participate in the new market. This initiated a flurry of
buying and prices started to escalate. In 2006 a law was passed
that legalised tyle='mso-spacerun:yes'> foreign
ownership in designated areas of Dubai in which foreigners were
allowed register freehold title with the Dubai Lands department,
enabling them to sell or lease properties without restriction.
Prices were high last year (2007) and some observers thought that
maybe this was their peak but then prices continued to rise as oil
costs increased. Prices have continued to rise and fall along with
the state of the US dollar which may not bode quite so well over
the coming years although currently prices are still high.
As concerns that the market will become flooded with a surplus
of property in the near future, prices may well begin to drop off
rapidly.
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