Weekly Dubai real estate news digest. Issue 28

Rapid growth, major reforms 
Welcome to the twenty-eighth issue of Market Insight, your weekly guide to what's happening in the Dubai real estate market.
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MARKET INSIGHT. Weekly guide to Dubai's property scene
Issue 28 |  January 12, 2014

Rapid growth, major reforms 

The development in the UAE realty sector is picking up pace as leading developers announce new projects and further investment opportunities. The IMF has forecasted the growth this year to reach 3.9% as compared to 4% last year. Last June, stocks received a further boost when the market index providers MSCI upgraded the country to emerging-market from frontier market status.

Nakheel is one of the many developers that has announced plans to crank up on their development pipeline. The firm, which just announced that it is set to be debt-free soon without any need of help from the government, said it will focus on development activity where it already has raised significant infrastructure. A spokesperson for the company said they will announce more projects this month. Meanwhile, Emaar properties said it will add over 200 villas to its Arabian Ranches development, launching the 'Lila' development. In Downtown Dubai, a Dubai-based private developer will be launching a new residential tower and sell units at AED1,800 per square foot.

With the rapid development comes fresh warnings for a property bubble. Sachin Mohindra, portfolio manager of the GCC Fund at Invest AD, said winning the bid for Expo 2020 "adds extra zest" and there is concern that another bubble may be forming. Meanwhile, Roubini Global Economics wrote a report, saying there is a risk for a "boom-and-bust" cycle in the coming years. 

Taking these concerns in mind, the UAE is stepping up efforts on reigning in speculation. The Land Department in Dubai has announced plans to complete a review of off-plan transactions in the first quarter of the year and may also introduce new regulations later in the year. Developers are also joining in on the effort against speculative buying and selling. According to Gulf News, developers are no longer giving the green signal to those off-plan purchases where the investor is simply looking to make a quick profit. 

Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. The Dubai market is at a crucial stage at this point, with rapid development on one end and regulative measures being implemented on the other. Striking a balance is essential and will determine where the market is heading over the next few years. The Expo win has certainly improved confidence in the market but it has also led to quick development that has triggered fears that another property bubble is brewing. Understanding these concerns, the government has stepped up its efforts to reign in speculation. We will continue to study these trends and keep our readers updated on the new regulatory measures being implemented while continuing to shed light on new investment opportunities. 


Pashma Manglani


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Property upswing on track

Five years after the real estate crisis, Dubai is on track for another property upswing.

According to the recently released Phidar House Price Index, the residential market has found a fresh buoyancy and traction reflecting a marked upward trend in all segments. In the last quarter of 2013, villa prices rose 45% since bottoming out in Q1 2011. Studies conducted by Phidar show that apartment prices have increased 42% since Q4 2011.

The Phidar Index based its findings on an assessment of condominiums in nine investment zones and villas in five investment zones across Dubai, thereby covering a comprehensive cross section of the property market. The pivotal aim was to assess the price performance of completed residential projects in Dubai. The index tracks sub-developments and buildings that have been completed since Q1 2009. 

Read more on Emirates 24/7

Studies caution 'expo-euphoria'

Rapidly rising prices and development have triggered fresh warnings of a property bubble.

Two separate reports have sounded caution after a sharp pickup across the emirate's economy last year. Prices in the property market rose by nearly 12% in the past six months, while Dubai's stock market index was the world's second-best performer in 2013 with a gain of 107.6%. 

"Winning the bid for Expo 2020 adds extra zest," said Sachin Mohindra, the portfolio manager of the GCC fund at Invest AD, an Abu Dhabi-based asset manager. "The only concern is that another bubble may be forming, particularly in real estate, but at least now everyone is talking about this as a concern."

In a separate report released last week, brighter prospects for the global outlook this year prompted Roubini Global Economics to upgrade its growth forecast for the UAE. They noted that while the Expo win would reinforce property market's share of growth. However, the upgrade risked drawing more money into the property sector.

The risk could be a "boom-and-bust" cycle in the coming years, the report warned. "With the UAE's dollar peg, there is a potential for bubbles to develop in Dubai, possibly reinforced by Expo-euphoria with the authorities relying on macroprudential measures to cool frothy asset markets that the Central Bank may not have the authority to reinforce," said the report.

Read more on The National

No more state aid needed: Nakheel

Nakheel is set to repay huge chunks of its multibillion-dirham debts ahead of schedule and has no further need of help from the government.

The Dubai property developer's announcement is further evidence of the recovering economy, which is largely being driven by the real estate sector.

Nakheel Chairman Ali Rashid Lootah said the company would repay more than a third of its total bank debt of AED6.8 billion, due for repayment in September 2015, in the current quarter. A total of AED4 billion will be repaid this year.

According to Lootah, by 2018, "we will be a debt-free company."

Read more on The National

Dubai mulls off-plan transactions overhaul 

Dubai plans new rules to control speculation on properties sold before they are built after home prices climbed by over 30% last year, according to the head of the emirate's Land Department.

The real estate authority plans to complete a review of what are known as off-plan transactions in the first quarter and may introduce new regulations in the second or third quarter, the Land Department General Director Sultan Bin Mejren said. Home prices this year may rise 35%-40%.

"Transactions on off-plan properties are a little dangerous," he said. "We are now studying them and looking at ways to ensure that they don't hurt the market."

As Dubai's economy and property market revive, regulators and companies are trying to avoid a repeat of a bubble that burst in 2008, where the buying and selling of off-plan properties for a quick profit, known as flipping, was seen as a major cause. 


Read more on The National

Developers reign in speculation

The stakes are being further raised against speculative buying and selling of off-plan property in Dubai. Developers are no longer giving the green signal to those off-plan purchases where the investor has paid up to 50% of the property cost, say industry sources.

"We have received feedback from some affected off-plan buyers to this effect in the last fortnight or so," said Robin Teh, country manager of the property services firm Chesterton International. "These buyers had paid 50% or more of the value and as such there is nothing to prevent them from selling."

"But the concerned developer declined to issue a no-objection certificate for the deal to go ahead; we are trying to ascertain whether this applies to an individual developer or others are also doing it."

Gulf News contacted developers that recently rolled out off-plan projects. While declining to go into the specifics of each deal, a senior official at a leading developer said: "We are constantly monitoring market changes and will stay in step with them. All sales and purchase agreements related to the recent off-plan sales have stringent conditions for buyers."


Read more on Gulf News

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