Property and real estate are two aspects in an economy that are highly vulnerable and immensely susceptible to the slightest variation. When these two elements enjoy a period of boom, there’s much to speak about – boast and brag even. But the facet of a threat of the boom bursting and collapsing into itself always lingers in the horizon.
The United Arab Emirates which experienced an economic crisis in 2009 that affected the real estate and property avenues has slowly started to regain its foothold in the domain with property and real-estate prices surging upwards distinguishably.
With a view to pinpoint the dynamics of this positive trend, Jones Lang LaSalle, one the biggest corporate engaged in the real-estate consulting and investment sector came out a detailed analyses of the ongoing upward burst of property trends in the UAE.
Though there have been numerous speculations that the real-estate sector in the United Arab Emirates – most particularly Dubai – may be heading towards another ripple despite the trends of boom, according to Jones Lang LaSalle’s assessment of the status quo, there’s every reason to feel positive about the surge. The following salient points can be summarised from the company’s analyses:
- Carefulness by the investing parties to ensure that the boom doesn’t transform into a ripple of severe real-estate downturn
- More driven approach towards the planning and development of projects
- More choices and alternatives to raise financial backing for projects
- Enhanced criteria by the government to ensure more optimal governance of projects
- Emphasised action-oriented planning, construction and development of projects
- Better prospects in certain key sectors accounting for the upward surge of the overall real-estate domain
In addition to these, the interest currently being generated and sustained in the real-estate sector by many potential investors has also been a reason for the entire sector to continue the way, it’s presently carrying on. Furthermore, the impending Expo 2020 is also seen as an instrumental catalyst spurring the growth of the real-estate domain, once again thrusting the sector into favourable limelight.
To gain more insight into the Dubai property market, Arabian Gazette caught up with Jonathan Fothergill, Head of Valuation U.A.E. at Cluttons Middle East. Here’s the main excerpts from the interview:
On the current real estate scene in Dubai
The areas to the south of central Dubai are witnessing major development. Many of the plans that were placed on hold following the recession are now being reinstated thanks to a growth in confidence throughout the real estate market.
Areas surrounding Meydan and Business Bay are expanding dramatically including District One, the first phase of the Sheikh Mohammed Bin Rashid City, which comprises of 1,500 villas, priced at between AED 1,700 psf and AED 1,800 psf, which compares to roughly AED 1,400 for the rest of Dubai. Just south of Business Bay, D3 continues to progress and is set to house Dubai’s newest freezone, bringing together international fashion and local fashion companies.
Dubai Creek is also undergoing major changes that will cement it’s position as Dubai’s vibrant commercial centre, with plans to improve accessibility and connectivity across the city. The creation of an island as a result of the extension will encompass Downtown Dubai, Sheikh Zayed Road, Business Bay, Bur Dubai and areas of Jumeirah. The primary reasons behind this three-kilometre extension is to link districts together via a water channel and generate a regular flushing system for our city’s famous and historically significant Creek. In addition to this, on the horizon are the plans for the Crescent Hotel at the top of the Creek in Jumeirah, which is set to become yet another iconic building in Dubai, and over 800,000 sqft of land has been set aside to create outdoor public spaces.
On the outlook for Dubai real estate sector
This year, we will see the real estate market move southward with extensive urban expansion plans in the pipeline. Dubai World Central (DWC), launched in October 2013, is the first of many projects that are fueling this move away from the coast.
Overall, growth within the real estate market is expected to become increasingly sustainable, particularly with the introduction of a number of measures by the government at both a local and federal level.
On Dubai’s property hot spots
Emirates Living and Dubai Marina continued to record increased levels of deal activity during Q4 2013, with capital value growth rates between 8.5% and just over 10%, ahead of the average for Dubai. Jumeirah Village remains the strongest performing submarket, with average villa prices rising by 18.4% to AED 990 psf ($269), pushing closer to the current Dubai average of around AED 1,400 psf ($381).
Downtown Dubai, Palm Jumeirah and Jumeirah Lake Towers also remain favourite lifestyle destinations due to the complete community feel, but we can expect an increase in interest in Dubai Sports City as well as a number of projects see a resumption in construction work and its reputation begins to grow as an affordable alternative to pricier developments along the coast.
On the current rules and regulations on Freehold properties in Dubai
There are a number of regulations that have been introduced that are already tempering the rate of capital value growth across the city’s freehold residential market. Developers too have begun to introduce regulations to help regulate the pace of growth, with Emaar recently banning off plan resales, which other developers are likely to follow. The doubling of property registration fees to 4% and the Federal mortgage cap are also starting to have an impact on the rate of deals.
As far as residency is concerned, this is a Federal Government issue and not an issue that relates to local property law. In principle, a person can own a property in the UAE but choose not to reside in the property, so freehold properties can be bought as holiday homes.
According to press reports back in 2012, a cabinet decision at that time entitled foreign property owners to a three-year residence visa if they bought a property worth AED 1 million ($272,480) or more, however this is still not yet an official law. Ownership of property and residency, or sponsorship is interrelated but we expect these to be viewed as separate issues, each of which is likely to play an important part in the ongoing maturing of Dubai’s real estate landscape.
Another key point is that it is not possible for an international buyer to own property in non-designated areas. If an overseas buyer wishes to own property in the non-designated areas, a long lease agreement is the only plausible option. Long leases differ from a freehold property and cannot be registered at the Land Department under the new law by international buyers. In spite of this, these leases remain as personal rights of owners and are legal. Unregistered long leases in areas outside of the designated ones remain enforceable as personal contractual rights between the parties. In regards to any dispute that might arise from an unregistered long lease, judgment will be passed by the Rent Committee. In order to create sustainable communities, visas should be viewed in a broad sense and the benefits of a long-term “investor visa” or “retirement visa” may help to sustain long term momentum in the real estate market.
On the impact of Dubai Metro’s Red Line extension
With Dubai’s win of hosting rights for the World Expo in 2020 now sinking in, the city is ramping up its preparations for the event, with transport infrastructure projects being fast tracked to ensure that the estimated 25 million visitors are able to travel swiftly across our city. Dubai Metro’s Red Line is gearing up for an AED 5 billion ($1.36bn) westward extension to Al Maktoum International Airport and the Expo 2020 site.
Connectivity is a challenge in a city that expands as rapidly as Dubai, but the Dubai Metro has been instrumental in linking communities and improving the lives of commuters by providing an alternative to our busy highways. When it was first inaugurated in September 2009, it was unclear how it would be received by Dubai’s residents, given the somewhat entrenched car culture, but we have embraced it, and a public transport culture is taking root. This has been evidenced by the gradual upward creep in the value of properties within close proximity to Metro stations.
(With additional inputs from Sharada Iyer)