Dubai or not to Buy? A Short Assessment of the Dubai Property Market

Never has there been such an ambitious and creative drive to establish a property market as has been witnessed in Cherrywoods Townhouses Dubai within the last three years. Running short on oil reserves, Dubai's crown prince, Sheikh Mohammed Al Marktoum, attempt to turn Dubai to the financial, commercial and tourism capital of the Middle East and in the space of three years he's more than succeeded. The country's GDP has expanded by 17 per cent within the last year and HSBC Bank estimates that there is $42.5 billion worth of projects under construction, weighed against $20 billion for the remaining portion of the neighboring oil states put together.

The end result has been the rise of Dubai while the world's most glamorous property investment market. Nothing in Dubai is understated. The tiny emirate, that only five years back was nothing more than a straightforward fishing village has suddenly end up being the Manhattan of the Middle East. Following mantra'bigger is better'Dubai has proudly announced the world's first seven star hotel, Burj Al Arab and is set to make the world's biggest shopping mall, the very first underwater hotel and amazingly, the longest indoors ski slope.

Already the annual number of visitors stands at 5 million and is set to go up to 10 million by 2007. The scale of development has been unprecedented with apartment blocks being constructed by the dozen and selling out within days to hordes of zealous investors willing to queue overnight to bag a discount in Dubai. The projects released are some of the very most inventive and ambitious the planet has seen, with manufactured islands such as for instance The Palm and recently The World capitalizing on the attractions of beach front living and redefining the world's geography in the process.

With property as from the ordinary as this, it's simple enough to see why Dubai's property market is attracting such large-scale international interest. There really is nothing can beat it and it seems everybody who's anybody may have an item of Dubai. Dubai's more exclusive developments are being purchased the celebrity classes and the world's elite. Ageing English rocker, Rod Stewart has already been the proud owner of Britain [The World's miniature Britain that's!] and villas along the Palm are being bought by sports stars, film stars and anybody with up to EUR1.5 million to pay on a personal waterfront retreat.

In that case much has been achieved in three years, where's Dubai to go from here? Nakheel, the company behind the extraordinary Palm and The World projects already has its eye, literally, on a new development. Dream City, just like the Palm is also some manufactured islands but out sizes the Palm significantly. When finished, Dream City will form the design of an eye, with the residential element on giant eyelashes extending out to the Persian Gulf. Villas at Dream City start at EUR425,000 for approximately 371 sq m (4,000 sq ft) of accommodation. Townhouses start at EUR200,000, while one and two-bedroom apartments start at EUR150,000.

For the property investor seeking a lucrative return, a new market is definitely a risky one and the fear is that the market may collapse immediately after it's removed !.With plenty of anecdotal evidence to claim that property prices in Dubai are rising by around 60% in one year, it's tempting to rush straight in and grab an item of the action. However the canny investors will have to consider if it is a lot of too fast.

The pace of the property market in Dubai makes is a speculators dream. It's not uncommon for properties to own been transferred up to and including dozen times even prior to the building is complete. Many opportunistic investors are booking 10 to 20 villas in new developments, selling them at significant profits before they have been completed.

Cashing in with this and perhaps in an attempt to cool the market, builders are charging a fee as high as 7% everytime a property is transferred and lending institutions are attempting to keep some control in the marketplace by agreeing to finance only the first sale price. In the secondary market, prices can exceed the first price by 10-70%, depending on the development's popularity.

Most of the indications are suggesting that the original hype is easing and prices are settling. Annually and a half ago 900 houses in one single development sold out in 7 hours. Many feel that demand will continue to be sustained and prices will continue to go up, though not at the frantic rates they have been rising within the last two years.
When compared with other new and emerging markets, such as for instance those in Central and Eastern Europe, Dubai appears to be a more desirable investment. Prices at the center market are comparative to those in Eastern European cities such as for instance Tallinn and Krakow. Unlike these countries Dubai has got the sunshine factor and a glamorous edge, that will be surely contributing to the high immigration from Europe, the Gulf Region and the Indian subcontinent. Over 100,000 extra people are expected to reach in Dubai every year. Such large-scale immigration will certainly sustain the property rental markets.

Other property markets are seeing rental yields drop through the floor. A lot of investors buying up properties and insufficient tenants to rent them! Ireland, Britain and lots of the New European capital cities are seeing yields drop to below 3%. In Dubai, rental yields have dropped from an extremely healthy 8-9% but are now holding firm at 6-7%. The truth that in Dubai rents are paid beforehand, sometimes up to 1 year beforehand, is surely a motivating factor for anyone considering a buy-to-let property in Dubai. On the downside, service charges on new development could be high, anywhere as much as £4000 per annum and might be requested by the developer upfront!

Despite the existing boom and huge immigration into Dubai cautious investors are raising understandable questions concerning the security of ownership in the UAE. Confirmed, no law has been passed to confirm the best of foreigners to own property in some of the projects launched to date. However, the UAE allows individual emirates to issue their particular legislation to regulate ownership of real property. While Dubai is devoted to encouraging overseas investment, they rule by decree and decisions could be changed overnight the whim of the existing ruler. The us government have promised that freehold would be granted in the near future. When this occurs it probably will further boost investor confidence in the Dubai property market.

If the property market in Dubai is to develop with any level of stability, capturing the interest of second homeowners and expats seeking to relocate is essential. If the market remains speculator driven, the likelihood of a speculative bubble is not unlikely. A revision of property ownership laws for foreign investors should encourage a far more stable property investment climate, helping in order to avoid any crash that could be the result of a quickly exhausted investor base of opportunistic speculators.