Arthur Kobozev, Executive Director of IMEX Real Estate, told us what is happening today in the Dubai real estate market and what sentiment prevails among investors.
Arthur, good afternoon. Please tell us about the current trends in the freehold real estate market in Dubai. A noticeable revival and rise are visible to the naked eye.
Hello. Indeed, the market situation is positive in the context of the level of price increases. All participants in the process - investors, sellers of finished real estate and developers - expect further growth. It is worth noting that, according to analysts, housing prices in Dubai are growing faster than in the world. So, over the past year, growth amounted to over 20%, and this year the pace has become more dynamic.
According to the Dubai Land Department, between January and June 2013, the number of transactions for the sale of residential real estate increased by 41%, and its total value (declared for evaluation) increased by 70% compared to the same period last year.
Investors are also encouraged to announce new projects, first of all, by the largest developers - EMAAR and Nakheel. They were joined by other "market sharks", including DAMAC Properties, Deyaar, Sobha Group, Select Properties and others.
Moreover, we are again talking not only about the construction of individual buildings, but about the construction of entire areas. For example, in the megaproject “City of Muhammad bin Rashid” alone, which will be located on a huge land plot - between the Al Hale highway and the Muhammad bin Zayed highway, it is planned to build 100 hotels.
What is the reason for such an active development? Perhaps Dubai is simply trying to restructure the debts accumulated during the past crisis, announcing the implementation of new megaprojects that will attract significant investment?
The positive expectations of investors are justified by several factors. First of all, there is an active recovery in the economy of Dubai and the UAE as a whole. According to the results of the year, the Dubai economy is expected to grow by 3.6%. Accordingly, it requires the attraction of new workers. Already today the population of Dubai exceeds 2.17 million people, while in 2011 its population was 1.97 million people. Of course, all visiting expatriates need places to stay.
Speaking of migration, we are dealing with an economically active population. According to the Dubai Department of Economic Development, 55% of business people expect revenue growth in 2013, and 30% are confident that they will remain stable.
The flow of tourists is also growing, which today has exceeded 10 million people, and it is planned to double it by 2020. It is obvious that the Arab Emirates has become the second homeland for migrants from countries of the region affected by military conflicts: they not only transfer capital here, but also move to their permanent place of residence.
I would also like to note that today, prices for residential property in Dubai are still 30% lower than the maximum values recorded in the third quarter of 2008, during the boom in the housing market. This is another factor that gives confidence in the potential for further growth.
Which areas of Dubai today are the most investment attractive and why?
First of all, areas with developed infrastructure and good transport accessibility remain popular: Dubai Marina, The Palm Jumeirah, traditionally popular among investors, fashionable Downtown Dubai, massive Jumeirah Lakes Towers, noticeably transformed recently, The Greens, low-rise areas Emirates Living, Arabian Ranches and others.
At the same time, demand is growing for built-up areas remote from the coastline, in which housing is more affordable. First of all, I would like to note the Jumeirah Village district, which, despite the underdeveloped infrastructure and a large number of unfinished buildings, has good potential according to the price / quality criterion.
I would recommend that investors considering buying a home in Dubai should focus not only on current rental income. One should not lose sight of such an indicator as a potential cost increase, which is very high, say, in projects on the man-made "palm" island. For example, one of the highest rates of growth in rental rates in recent years has been shown by the International City area, but from the point of view of capitalization potential, this is not the best option. In general, it is necessary to assess the situation in the complex and weigh the priorities for each specific investment case.
Do Russians remain leaders in the number of real estate transactions in Dubai?
According to statistics from the Dubai Land Department, Russians are among the ten most respectable investors in freehold real estate.
Their share is very noticeable, especially in the so-called "new" Dubai. It is worth noting that in the first quarter of 2013, the volume of transactions with real estate of the emirate amounted to 53 billion dirhams (US $ 14.4 billion). The traditional leaders in terms of investment remain the representatives of India and the UK.
What can be said about the preferences of our compatriots?
If we talk about the preferences of our compatriots, then they are traditional: they are primarily interested in proximity to the sea. And since the choice of real estate by the sea, which foreigners can acquire ownership of, is actually limited to the areas of Dubai Marina and The Palm Jumeirah, it is in these areas that “our people” acquire the most housing.
As for the price framework, here I would not highlight unambiguous priorities. Both very expensive objects are sold, as well as at an average cost. For example, we work with real estate worth from US $ 200 thousand to tens of millions.
Our compatriots see the objective recovery of the market and are activated against this background. You know that you can emigrate to the United Arab Emirates in just a few days and feel comfortable and safe here. Many take this opportunity when choosing a new home under the Arabian sun.
Is there a shortage of supply on the market today?
Yes, and it lies in the fact that interesting objects put up for sale at an affordable price leave the market very quickly. As a rule, most buyers, especially those who are not yet familiar with the local specifics, take a time out for reflection, and when they make a decision, the object is already sold.
The market situation is changing very quickly. Housing in the projects of large developers is sold even before the start of construction, it is literally swept away in one day. Investors are looking for profitable options and are even ready to stand in long lines when launching new projects, as during the boom in the market.
What did the 2008 crisis teach investors? How has Dubai legislation improved today?
First of all, developers imposed restrictions on quick resales. Now, an investor who wants to resell an object is required to pay an average of 35-40% of its value. This holds back the speculative component.
As far as I know, the Dubai Land Department is currently developing standards governing the emirate’s real estate sector, which should come into force within the next two years.
They will help to control the activity of the real estate market in order to prevent a recurrence of the situation in the mid-2000s, when an incredible boom was observed in the real estate sector.
A special law is also being developed that protects the rights of investors.
According to the authorities of the emirate, the new bills are designed to strengthen the code of laws governing the activities of the real estate sector in Dubai, increase the competitiveness of the market and increase its attractiveness in the eyes of local and foreign investors.
In October, the headquarters of Lukoil moved to Dubai. There is an opinion that the "influx" of residents with high incomes can further spur the rise in prices. Do you agree with him?
This case is far from the only one, if we talk about the so-called mass move. I do not think that it caused or will cause any turmoil in the rental market. Especially considering the "outflow" of employees of state-owned companies from Dubai to Abu Dhabi. Let me remind you that a directive was recently adopted, according to which foreign specialists employed in public service in the capital are obliged to rent housing there. Their number today is estimated at 15 - 20 thousand people. We can draw the appropriate conclusions.
What are your professional recommendations for those who want to buy property in Dubai?
Do not delay decision-making, at the same time do not act at random, always be guided by common sense and comprehensively assess the situation. It is important to remember that the faster a deal is made in a growing market, the more profitable the investment. And do not neglect the support of qualified professionals. They can become your reliable guides in this market. We will be glad to see everyone in Dubai!
You can get any additional information about the acquisition and management of your property in Dubai from IMEX Real Estate specialists by phone in Moscow +7 495 5100008, toll-free phone in the UAE 800-IMEX (800-4639) or by sending a request by e-mail info @ IMEXre.com.
