Aviation hub status driving Dubai's real estate market

Dubai's increasing popularity as an aviation hub is fueling global investor demand for real estate, which has seen property prices rise at the fastest pace in the world, according to Knight Frank.

“Another point to consider is the growing importance of airports in shaping real estate investment. Dubai’s growing popularity as aviation hub has supported the city’s rise as a staging post for international real estate investment,” the UK-based consultancy said in its Global Cities 2015 report.

In September, Al Maktoum International at Dubai World Central was given the nod for a Dh120 billion expansion that is set to increase the capacity to 220 million passengers a year.

Planned to be the biggest airport project in the world, Al Maktoum International's expansion will undertaken in two phases, with the first phase providing capacity for 120 million passengers a year and capable of handling up to 100 Airbus A380 aircraft at any one time.

Construction is expected to take between six and eight years. Post completion of phase one in the early 2020s, the airport will then be expanded incrementally in response to increases in demand.

Dubai Airports has said passenger traffic through Dubai International jumped an annual 10.8 per cent to a record 6.6 million people in August as the hub returned to its full capacity after a runway upgrade.

Dubai International, one of the world’s busiest airports, had cut back flights by about 26 per cent for a period of 80 days from May 1 as its runways were being refurbished. Normal service resumed on July 21.

Passenger numbers rose 5.7 per cent to 46.48 million people in the first eight months of the year. Cargo volumes in August rose 4.3 percent to 192,902 tonnes, while in the first eight months, volume totalled 1.56 million tonnes.

Real estate growth

In fact, Cluttons, an international real estate consultancy, said the real estate sector is expected to emerge as one of the principal beneficiaries of the development of Al Maktoum International Airport.

“Aviation has historically been a significant contributor to the city’s growth. Once again, the sector will deliver the next wave of growth for Dubai, well beyond the current horizon of the 2020 Expo, which is already translating into a flurry of construction activity across the city,” Faisal Durrani, Cluttons’ International Research and Business Development manager, said.

“The residential sector will no doubt be an obvious long term benefactor of the significant rise in the number of jobs being created, with both lettings and buyer demand set to rise significantly as the number of households in the city increases,” he added.

Price rise

Earlier this month, Knight Frank’s Global House Price Index revealed that Dubai continued to top the annual rankings for the fifth consecutive quarter, recording an annual price growth of 24 per cent in the year to March 2014.

In the six-month period (Q4 2014 to Q2 2014) prices rose by 7.4 per cent, while in the three-month period (Q1 to Q2 2014) prices were up by 3.9 per cent.

Dubai connecting Africa

KF’s Global Cities 2015 report also expects investors to target Africa’s mature markets of Kenya, South Africa, Botswana, and Nigeria with Dubai playing the key role in providing the growth impetus.

“Nairobi in particular has grown rapidly as a regional centre due to oil discoveries, the rise of the telecoms industry, and many global firms deciding that a regional base in east Africa is necessary to truly operate a pan-African business. Cape Town, Johannesburg and Lagos are also strategic hubs, and Dubai services a growing flow of African investment capital,” the report states.

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