There is 'no negative sentiment in the market'

Dubai-based real estate players have predicted an upturn in the UAE market owing to price stability in Dubai and Abu Dhabi's real estate sector. Having a currency pegged to the relatively weak US dollar is continuing to be beneficial for investors making Dubai look attractive for European investment.

Emirates Business spoke to a cross-section of developers in order to feel the pulse of the sector in Dubai amid negative sentiments in the market.

Manal Shaheen, Director of Sales, Marketing and Customer Service for Nakheel; Nasser Rafi, Managing Director, Middle East of Hamptons International for Emaar Properties; Ali Al Rahma, Chief Executive of Eqarat.com, said there was no need for a gloomy sentiment in Dubai's realty market.

Demand for properties in Dubai continues to rise across residential and commercial sectors with no sign of abating, despite recent gloomy predictions from some analysts.



Are prices in Dubai coming down with the global downturn and the negative sentiment in the market?

Manal Shaheen: Whatever happens in markets elsewhere in the world, the Dubai real estate market remains robust. While the sub-prime mortgage crisis has had some impact on Dubai, this has been off-set by the incredible liquidity within the region. Having a currency pegged to the relatively weak US dollar is also beneficial and makes Dubai an attractive option for investments especially from Europe. Given that there is still a huge demand for property in Dubai, we expect prices to remain at a competitive level.

Nasser Rafi: Dubai's property market has so far managed to remain largely insulated from the ongoing global recessionary trends, and the robustness of the market response at the upcoming Cityscape Dubai will shed further light on just how self-assured it will remain. Indeed, the market has managed to sustain healthy growth levels, as demand has managed to stay well ahead of supply. The market presents investors with viable short, medium- and long-term investment options. Current market prices reflect Dubai's market dynamic, which is characterised by its high demand and lack of supply.

Ali Al Rahma: There is no current indication that real estate prices in Dubai are coming down due to either of these factors. The credit crunch has affected European and American markets where mortgages represent a high percentage of home purchases. This is not the case in Dubai, where there is a high level of cash purchases. Whereas other markets are in decline, we may see an upturn in the UAE market due to the liquidity in the region and due to the stable real estate prices in both Dubai and Abu Dhabi.

In addition, the Government of Dubai is committed towards ensuring investor confidence and market stability. Legislation to regulate the market and ensure greater transparency is just one of the measures aimed at increasing confidence in the market. Further, I don't believe there is any negative sentiment in the market. Perhaps we should see the results of Cityscape Dubai before we make such statements.



Are property prices stabilising today in Dubai?

MS: Demand for Nakheel's Dubai properties continues to rise across residential and commercial sectors, and we see no signs of it abating despite recent gloomy predictions from some analysts.

This year's sales have even been immune to the usual summer dip in July and August, which indicates just how healthy the market is. The Dubai real estate market is maturing, but it is still an attractive market to invest in. Dubai has established 'first mover' advantage in the region, with clear property laws and legislation for the protection of the consumer. Homebuyers, including overseas investors, can buy property freehold, safe in the knowledge that legal watchdogs such as Rera exist to protect their interests.

This protection has a vital role to play in the long-term success and stability of Dubai's real estate sector.

NR:Property prices are essentially dependent on the forces of demand and supply. In the short term, it is difficult to predict property prices because the high demand is being serviced by the existing supply of homes.

In the medium to long term, with the supply channels becoming stronger, commensurate to demand, there will be an effect on the price of property.

AAR: The Dubai real estate market is still developing and as the market develops, prices generally have a tendency to stabilise.



Do you believe the recent talk of slowdown is only a cyclical phase and Dubai's realty still has room for growth?

MS: Dubai is increasingly becoming the business and tourism hub of the Middle East and with 1.7 billion people living within a four-hour flight radius of the Emirate, the sheer numbers in the context of the region bode well for its future growth.

Through bold decisions by its leaders, Dubai has also established "first mover" advantage in the region and has clear property laws and legislation for the protection of the consumer. If you compare the forecast of real estate supply with the construction capacity constraint, which is currently around 80,000 houses per year, and if you believe that population growth will continue to rise by six to seven per cent per annum, then by 2020 we will still not have enough residences – even with the staggering amount of homes that Nakheel is delivering over the next two decades. For this reason, I believe the market will continue to be an attractive one for the international investor.

NR: Dubai's economy is projected to grow at the rate of 11 per cent annually, as per the Dubai Strategic Plan unveiled last year. This will translate into a vibrant economic environment supporting diverse business sectors and consequently drive demand for residential, commercial, hospitality and retail property. This strong economic performance will continue to spur investor confidence, both locally and internationally.

The latter will find the local market an attractive prospect as markets in their own countries take a downward slump.

In addition, a strong economy will attract many foreign nationals to relocate to Dubai. The continuously growing expatriate population continues to be one of the main drivers of demand for property in Dubai.

AAR: Dubai has a strong demand for commercial property, which is fuelling the demand for residential ones. Recent industry reports indicate Dubai's commercial property sector is witnessing a continuous increase in demand, with more than 24 million square feet of commercial space being developed currently to accommodate the expansion of new and existing international and domestic companies.

Further, the completion of the aforementioned office spaces will exceed the already existing corporate developments by more than 50 per cent. Commercial and office rent is expected to remain high throughout 2008, with Dubai office rentals showing a 55 per cent increase over the past year.

In addition, the rental market also influences the demand for real estate sales and as we have seen over the past four years, rents in certain instances have increased by more than 200 per cent.

Given the market conditions for businesses to relocate to Dubai, including the tax free status for corporate and income tax, there is plenty of room for further growth.



What kind of properties should an 'investor' buy today? Should they consider small sized units, mid-end, or mixed-use ones?

MS: When it comes to buying Nakheel property, there is a huge range of choices, all of which are delivered in a community context. In nearly every case it is possible to live and work in the same community or to be within easy reach of your work place, should you so choose.

When looking at the market as a whole, there is pretty much something to meet everyone's taste and budget. In this respect it is difficult to advise what one should or shouldn't buy, but you have always got plenty of choice.

NR: Eventually an investment decision depends on the budget of the investor. Different properties will yield different profits based not only on property size, but also on location, developer and additional amenities. Mixed-use developments tend to have higher yields due to the convenience factor.

AAR: The decision will be based on several factors and will depend upon the strategy of each investor. There will always be a demand for properties such as studios and one-bedroom units, which show a good rental yield. For the more long-term investor, the villa market offers good opportunities, as the supply is less.



Where is the current buyer interest? Is it higher in villas or apartments? How do premiums compare between apartments and villas?

MS: So far this year, Nakheel has sold more than 6,100 units, exceeding our own ambitious targets. The ratio of Nakheel's sales very much reflects the ratio of the units released. These units cover a broad spectrum of buyers' interest with sales in 2008 comprising more than two thirds apartment sales (68 per cent), over a quarter villa sales (27 per cent) and five per cent land plot sales. These units were released in 13 staggered launches between January 1 and August 31 this year.

A further 2,650 units are set to be released in 11 additional sales launches scheduled for the final quarter of 2008.

The three Nakheel developments accounting for the largest volume of sales are Badrah Manara apartments, with almost a third of sales by volume (32.2 per cent); apartments in the Lake District, with 15.2 per cent of the total; and Al Furjan villas, making up 14.7 per cent of sales by volume.

The numbers speak for themselves – the market is interested in the full portfolio that we have available.

NR: This boils down to a demand and supply equation. There is high demand for both types of properties.

But demand for villas, relative to supply, is higher than for apartments. Villas tend to be more profitable than apartments due to the supply factor and a preference for families to prefer villa living. The market is currently seeing more apartments on the market than villas.

This continues to drive the price of the latter upwards, leading to higher yields for investors. However, villas are considerably expensive, a factor which filters out some investors who cannot afford these units.

AAR: What the market needs right now is affordable villas and apartments, based upon the buying capabilities of the expatriate workforce in Dubai. As new developments are completed and delivered, we will see a significant shift to a homeowner market. This will be driven by the financing available and the ability to secure a mortgage.

Premiums on apartments and villas vary and depend on a host of factors, all related to the project.

Some of these factors include the location, size, price, completion date, and payment terms.

The reputation, experience and number of units delivered by a developer are also factors that need to be considered.

It is a fact that certain developments command a higher premium, whether apartments or villas.

Follow Emirates 24|7 on Google News.