Weekly Dubai real estate news digest. Issue 55

Growth spurt despite warnings 
Welcome to the fifty-fifth 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 55 |  July 20, 2014

Growth spurt despite warnings 

With several high-profile developments underway, the UAE's property market witnessed at least a 30% rise in apartment rental prices in the past year based on data from Dubai-based intelligence firm Reidin.com.

The Mall of the World development is the latest of all these changes - a $6.8 billion project that will see the world's largest mall constructed with more than 743,000 sqm of leasable area. "We are confident of our economy's strength, optimistic about our country's vision and we continue to broaden our vision," said Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai. 

Concerns grew over the past month when Dubai's leading builder Arabtec saw shares plummet in June following the resignation of its CEO. However, in the past week, the emirate's stocks rose to the highest level in over five weeks. The benchmark DFM General Index jumped 1.9% to 4,858.29 on Tuesday - the strongest level since June 8. Arabtec, the UAE's biggest publicly traded builder, added 1.9% to AED4.95, taking a rally this month to 90% and making it the best performer on the MSCI Emerging Markets Index.

With concerns mounting, the International Monetary Fund had encouraged Dubai to add new measures to control the property market. However, the Dubai Land Department has said that there are no plans to increase property registration fees. Sultan Butti Bin Mejren, director general, said the market is stable and appears very healthy. According to him, this is because of the recovery of real demand for the various types of units by investors and tenants. He explains that all parties are working with a clear vision based on long-term objectives and in accordance with the laws.

Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. An impressive resurgence by Arabtec lifted Dubai's index three weeks after a selloff ended the bourse's longest rally since 2005. Developers across the emirate also continue to announce new projects, including an AED2.3 billion mixed-use project in Dubai Investment Park. While experts continue to call for added measures in the market, there has been no official comment as to what action will be taken to further protect the realty market but we are sure to hear more about new regulations in the coming months. 


Pashma Manglani


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Developers urged to bring in 'rent to buy' schemes

Dubai developers have been encouraged to reintroduce rent-to-own schemes to help expats find an affordable property to buy in the emirate's booming real estate market.

International property agency Chesterton said rent-to-own schemes, which were popular during the early 2000s, would help those struggling to afford to buy amid stricter regulations designed to cool rising prices.

The company said the schemes would "inspire confidence in buyers and reduce the risk element in buying into the UAE market."

Simon Gray, managing director, explained that rent-to-own schemes have benefits for both tenants and developers. "While sellers get an option fee and potential buyer, tenants get to live in the property and try out the neighbourhood before actually settling in for the long term. It also provides an opportunity for the seller to sell the property at a higher asking price because buyers who cannot own a house in any other way are usually willing to offer a higher future price based on the assumption that the market will improve."


Read more on Arabian Business

New mega-projects cause for concern: Bank

With Dubai announcing new mega-projects, Bank of America-Merrill Lynch says it is worried that the emirate could repeat the same mistakes that it made in 2009.

Last week, Sheikh Mohammed bin Rashid Al Maktoum, vice president and prime minister of Dubai and ruler of Dubai, announced plans to build Mall of the World - a project that comes with a price tag of nearly $6.8 billion. 

"We worry about potential policymaking complacency and that such ambitious projects could lead to another boom-bust real estate cycle, particularly as there has not yet been major deleveraging in the economy," said Jean-Michel Saliba, an economist at the bank. In 2009, Dubai spent billions of dollars building spectacular hotels and artificial islands off its coast. Once the economic crisis hit the region, the emirate was unable to service the vast pile of debt it had amassed to fund these projects.


Read more on Wall Street Journal

No hike in property registration fees 

While experts have called for additional measures to protect the real estate market, the Dubai Land Department (DLD) has said that there is no intention to hike property registration fees. 

Sultan Butti Bin Mejren, director general, DLD, says that if there was any intention in that regard, it would be in consultation with relevant authorities and will be treated with absolute transparency. A recent report by the International Monetary Fund was the latest in expressing concern about the need for additional measures to prevent another property crash. 

Bin Mejren added that the real estate market is stable and appears very healthy, ruling out the existence of any risk.


Read more at Emirates 24/7

Arabtec shares rebound

Arabtec's 13.5% rise has powered the Dubai stock market. The builder's gains ensured that the DFM General Index, which rose 3.3%, became the best-performing among 90 international bourses.

The builder's share price rose by as much as 14.3% before closing at AED4.86, marking a dramatic reversal for the firm whose shares lost more than 60% of their value in June following the resignation of CEO Hasan Ismaik.  

The index now stands at 88% of its May 14 peak of 5,374.11.


Read more on The National

Interest rates down to lowest point 

Interest rates on home loans have significantly dropped by almost 100 basis points over the last 12-18 months, says Preeti Bhambri, managing director, Moneycamel.com, a personal finance website in the UAE.

According to her, rates are now as low as 3.75% per year. Banks are also waiving the valuation and processing fees, which means buyers can save nearly AED20,000 in administrative charges if they sign up for a AED1.5 million mortgage. 

From a financial expense point of view, this is a great time to take a home loan, she points out. "Most banks are now offering new home loans at starting interest of 3.99% for the first year and 3.49% for buyout loans. The rates are at their lowest ever."


Read more on Gulf News

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