Dubai Property Market Boom – Reasons for Continuation

Dubai property market is expected to experience the ongoing boom for longer than most experts believe. There are reasons for Dubai property sector to be on the road to rise since the last few years. Following is an overview of factors impinging on the success of Dubai property sector.

a) Dubai property mortgage rates are about 8.5 percent and still need to get adjusted vis-à-vis US rate cuts. This is inevitable in the wake of the dollar peg to AED. Just a few years back, the interest rates in Dubai property market were as low as 7 percent. Thus the downward pressure on house prices in Dubai property sector. The current rates could go much lower if the mortgage market becomes more competitive. This in turn will make buying Dubai property cheaper than renting the same. Real interest rates are, in fact, already going in the negative direction due to high local inflation.

b) Dubai property rental yields are 7-10 percent which are abnormally high by international norms. It is quite unlikely that rents will fall in Dubai property market. This is due to the obvious fact that the market is booming over the recent years. However, it is more likely that mounting capital values will force Dubai property rental yields to come down to the international standards. In any case, there is no reason for the rental yields to be higher in a booming market like that of Dubai property sector, as compared to a place where the economic matrix is weaker.

c) The demand-supply ration in Dubai property sector is still not balanced. As compared to growing demand, the supply is far less to be able to meet the same.

d) As compared to other cities worldwide with similar salary levels, Dubai property prices, especially house prices, are quite low. This inconsistency will be eliminated once prices rise still more.

e) Dubai freehold started six years back and had no formal legislation in place. It has developed to the level where Dubai property sector now has a government backed regulatory authority along with world-class rules and regulations in place.

f) In 2006, Dubai Financial Market crashed and consequently forced investors towards Dubai property as a lucrative alternative. The financial market recovered by the end of 2007 and is now again on the downward slope. Yet again a more stable market (read Dubai property) will start attracting investments.

g) 2008 has been a year with no stable investment alternatives available worldwide. This in turn has worked well for Dubai property sector since it is seen as an attractive investment option.

h) At the moment, Dubai property sector still has certain undeveloped areas such as holiday lets and fractional ownership, which are big markets in beach resorts around the world. Thus sources of higher rental yield are yet to be fully exploited in Dubai property sector.

i) The most proactive property developer in Dubai has been the government of Dubai. The robust legislation and regulation for the Dubai property sector has ensured that the market will withstand any adverse developments.

Buying off-plan property in Dubai

Off-plan property in Dubai has become quite a rage lately. Though the concept is becoming increasingly successful, there are speculations in the property market as to what factors make selling and buying of off-plan Dubai property so.

The article gives an overview of the factors impinging on off-plan property in Dubai that have to be borne in mind by a prospective buyer.

• The Property Developer
Before going in for off-plan property in Dubai, one has to have an inside out knowledge of the respective developer. The name, the years in business, past projects, business record, history of any complaints against him/her or their development, are all important considerations to be made. Buying property is not a small deal and trust factor is crucial.

• The Financial Scaffolding
It is again vital to know who is backing the respective property developer. In Dubai, the least risky transactions are with government projects. Big names in Dubai property market such as Nakheel, Dubai Properties and Limitless are fully owned by the government which in turn has a major stake in Emaar as well.

• Price of Property Units vis-à-vis Construction Costs
If the property units in question look too cheap to be able to be completed, think twice. Low off-plan rates are a warning signal as they hint towards inferior quality/ failure of the developer to deliver the completed property in the face of financial trouble.

• Escrow Account Bank Details
Since July 2007, it is compulsory to have escrow accounts for all off-plan property developments in Dubai. It is crucial to know the bank which is providing escrow facilities for a particular development. It is always a good idea to go for a property wherein the bank is owned or controlled by the government.

• Payment Structure of the Property
One needs to go through the payment structure of off-plan property in Dubai carefully to see if it suits one’s practical circumstances. This is particularly important when getting the property financed. Certainly one doesn’t want to pay interest for a loan if the project is delayed.

• Stage of Development of the Property
The risk factor involved in off-plan Dubai property depends upon the stage of development as well. If the construction hasn’t started and all that the developer can show is the architect’s drawing, then the probability of project delay is the highest. It is far more likely that the property unit will be delivered on time if you can see a substantial chunk of work already done.

• Costs of Renting Temporary Property
If buying off-plan property in Dubai means that you’ll have to stay on a high rent for a long time, you’ll need to add these costs to the total expenditure. If this figure is quite high, shifting to a completed property in a lesser known place is a better and more sensible idea.

• Location of the property in Dubai
Since location of a property is one of the most important points to consider before making the purchase, it is always advisable to check the locality personally.

Also Read: Dubai Property Market - Buy or Rent?

Average Index in Dubai Real Estate

Real estate rates in Dubai have been on the rise lately. From real estate buyer’s point of view, it is crucial to have an idea of prices in different real estate developments. Property index is a yardstick that presents an outline of real estate rates for apartments, villas and commercial developments in Dubai.

For anyone buying real estate in Dubai or for that matter anywhere in the world, the respective location is the biggest factor influencing decisions. In Dubai, there are a lot of preferable real estate developments – for residential as well as commercial purposes.

Dubai real estate does have something to suit every pocket; still the general index shows a rise in real estate prices. However, at the same time, in spite of the soaring rates, it is still possible to get an apartment in Dubai for less than 500,000 AED. Though such places are away from the city, they will no longer be so as the city is fast expanding. The emergence of areas like the Marina and the Gardens in Dubai real estate market is an ample evidence of the same.

Real Estate Averages – Apartments, Villas and Offices

When it comes to apartments in Dubai real estate market, the five most expensive and least expensive areas are given below.
Most expensive areas for apartments:
• The Old Town Island
• Trade Centre 2
• Jumeirah Park
• Burj Dubai Downtown
• DIFC
Least expensive areas for apartments:
• International City
• Al Hamra Village
• Academic City
• Emirates Gardens
• Emirates City

Villas in Dubai start from something around 2 to 3 million AED but these are smaller in size as compared to what one gets for a higher price. Among real estate developments in the 5 to 10 million AED bracket, there is more choice when it comes to villas. By average price, the five most expensive areas for villas in Dubai are Emirates Hills, Al Barari, Jumeirah Palm, Barshaa 2 and Sufouh 1. On the contrary, the five cheapest areas are Al Reef, Jumeirah Village South, Al Hamra Village, Hydra Village and Al Salam City.

In addition to being a great holiday home, Dubai is also an upcoming business hub in the world. Consequently, Dubai real estate sector is consistently coming up with state of the art residential and commercial projects. The most expensive real estate areas for offices in Dubai are DIFC, Meydan, Old Dubai, Burj Dubai Downtown and Dubai Marina. There is no surprise that DIFC and Burj Dubai are the most costly locations in Dubai for commercial spaces. An office in DIFC can be bought for up to 35 million AED.