A look at the economic growth of the emirate of DubaiChoice Group Real Estate
The United Arab Emirates, whose oil reserves are the third largest in the Middle East, are successfully developing their economy, trying to avoid its dependence on oil and gas production. As for the emirate of Dubai, in 2003 its status as a leading financial center was confirmed by the fact that the IMF and the World Bank held their annual meeting here - the first in the Middle East.
At the same time, the main locomotives of the emirate’s economy are construction and tourism. Recently, Dubai receives about 5 million tourists a year and expects 15 million visitors in 2010 and 30 million in 2020. The turnover of the construction industry is growing at about 6% per year due to an increasing number of real estate projects.
The model of the free economic zone, tested in the Jebel Ali area and making Dubai the leading center of tax-free business, has been successfully applied in other projects - in particular, Dubai Internet City and Dubai Media City, opened several years ago. The government also fostered the development of the construction industry by establishing Emaar (Imaar), the largest real estate developer in the region, and Nakheel (Nahil), leading projects such as The Palm Jumeirah, The Palm Jebel Ali, The Palm Deira and The world.
In addition, in May 2002, it was decided that foreign citizens would be able to purchase real estate in special areas under freehold conditions, that is, with free ownership. This gave an impetus to the unprecedented growth of the real estate market in Dubai.
There are a number of other key factors that contribute to its development. This is a population growth (doubled over the past 10 years), an increase in airport capacity (up to 30 million passengers in 2010). This also includes the improvement of urban infrastructure, which in the future will include a network of rail passenger transport.
Since the government of Dubai allowed the sale of property with free ownership, many of the currently developing projects are being bought up for resale. Buyers pay substantial bonuses even for what is not yet completed. Surcharges to the initial price are 10-20% for construction in progress, 40-50% for completed facilities, and up to 140% in prestigious places like Palm Islands. In addition, a number of other factors affect the market.
- The development of the Free Economic Zones of Dubai Internet City and Dubai Media City, as well as the Dubai International Financial Center, has attracted educated immigrants who want to reveal their abilities and connect their future with the UAE.
- The region’s impressive liquidity and the development of Dubai as an international leisure center attracting foreign investors who want to buy a summer house in a safe place or property for resale.
- The control over the lease of land, which the Government of Dubai exercises through Emaar and -Nakheel.
- Low percentage of commission and small margins on cash turnover.
- Low housing prices compared to Hong Kong, London, Singapore and New York.
- High level of income from real estate compared to world practice.
One of the features of the international market in recent years has been the rise in property prices. Recently, both margins on resale and rental income have been more or less at the same level. But even with small margins, the income of Dubai agents remains high. Perhaps this is due to the imperfection of the local mortgage market. Although, as real estate prices rose, agent incomes began to fall, so far this trend has remained within acceptable limits.
The mortgage market in Dubai is relatively undeveloped - despite the fact that there are such strong players as Amlak Finance, HSBC, RAKbank, Tamweel, and most importantly Mashreqbank. Now most transactions are paid in cash. Mortgages with a 25-year maturity are usually available for transactions in US dollars and yield about 6-7% per annum. Another option is to rent a property with a deposit of at least one year in advance.
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