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As a safe haven within a volatile region, Dubai cements its place as the Middle East’s preferred real estate investment market whilst maturing market conditions bode well for more sustainable real estate growth. By Anna Amin, Editor, Cityscape magazine.

With Cityscape Global 2015 taking place this month, it is time to take an in-depth look at current market conditions in the event’s host city and birthplace – Dubai. The 14th edition of the Middle East’s largest and most influential real estate event, taking place from 8 – 10 September at the Dubai World Trade Centre, this year shows a 30% growth in exhibition space on last year, underlining the continued confidence in Dubai’s maturing market. Over 300 exhibitors from the UAE, Turkey, Qatar, Kuwait, Bahrain and many other countries from around the world will showcase their projects to an audience of real estate investors, professionals and government authorities in the three day show which is viewed as the barometer of the region’s real estate industry.

Investor Sentiment

First of all, let’s look at Dubai in its regional context from an investment perspective. In 2013, the emirate was tipped as one of the world’s hottest real estate investment markets. Two years onwards, Dubai continues to maintain this status, which is evidenced in JLL’s latest MENA Investor Sentiment Survey which has found that Dubai remains the preferred destination for foreign investment in the Middle East. According to the survey, key attraction points for investors include the UAE’s political and economic stability and market transparency which has been further fuelled by the favourable performance of the real estate sector over the past two years, particularly in Dubai.

Ian Albert, Regional Director Colliers International MENA, adds that further key attraction points for investors currently looking at Dubai are yield appreciation, reasonable service charges and a good standard of property management. “Investors in Dubai now consider long term strategies rather than short term gains,” Albert says.

Mat Green, Head of Research & Consultancy UAE, CBRE Middle East, agrees saying that although the Dubai market has cooled off slightly during the past year (due to a combination of government intervention, global economic uncertainties and looming new supply), “Dubai still remains the most attractive investment market in the region, with continued interest from local Real Estate funds, REITs, as well as institutional investors.”

Has the Market Become ‘Smarter’?

Looking at the Dubai market recovery and the rapid price growth over the past two years, the inevitable question is: are today’s market conditions fundamentally different to those of the pre-crash times?

“Yes, conditions are now fundamentally different,” says Craig Plumb, Head of Research at JLL MENA, as do all of our other experts.

Plumb identifies five major areas why JLL believe the market is ‘smarter’ the second time around and why another bubble will probably be avoided:

Image courtesy of Cityscape Global.

Image courtesy of Cityscape Global.






Prices have stabilised without crashing

“Following unsustainable levels of price growth (average residential prices in Dubai increased by 56% in the 2 years to July 2014) the market has stabilised over the past 9 months – with a decline of around 5% since July 2014 peak. This stabilistaion is certainly good news for the overall market and has resulted in much more sustainable conditions and removed all the previous discussion of another bubble.  JLL believe prices will continue to decline and have forecast a price decline of around 10% for 2015,” Plumb says.

According to JLL, there are three major reasons for the stabilisation of prices. Firstly, buyers have recognised that prices had risen too quickly and that there were no prospects for short term capital gain. Secondly, the strength of the US dollar reduced the attraction of Dubai real estate for the 75% of overseas buyers – especially those from Russia, India and the Eurozone. Lastly, government regulations to reduce speculation have taken effect and “taken the heat out of the market.”

Reduction in off-plan sales

According to Plumb, today’s market is less dependent on pre-sales than it was during 2007 and 2008. “While there have been a number of well publicised projects released on a pre-sales basis over the past few months, most of these projects have been from well-respected developers such as Emaar and Damac and there are far fewer secondary developers announcing projects on a pre-sale basis than in 2007/08.  There have also been no recent announcements of master developers selling land plots to sub developers, which was one of the major reasons for the previous crash as these sub-developers faced funding issues following the impact of the global financial crises,” he explains.

For Colliers’ Albert, the nature in the change of transactions is one of the primary differences between the 2007/2008 market and the 2015 residential market in Dubai.

“Today the majority of transactions are for completed properties, purchased by investors and increasingly end-users. Both groups require a much greater level of due diligence as they pay a full asset price and not a proportion of it, as in off-plan sales. In the pre-crisis era the majority of transactions were for off-plan units, as the majority of the market we see today was still under construction, or in the early phases of planning.

“In addition to this, the ease and speed at which a transaction could be made (few regulations were in place at the time, and little if any paperwork or registration was required) all contributed to the creation of a speculative environment,” Albert says.

Better regulations

As previously mentioned, new government regulations have also contributed to stabilisation of the market, JLL say. These include new mortgage regulations (limiting the maximum LTV available to borrowers) and the increase in the transfer fee for real estate from 2% to 4%.

Furthermore, RERA now requires developers to lodge between 30% and 40% of the total construction costs of projects in a project specific escrow account, before any pre-sales can be launched. “This should help reduce the level of highly speculative construction that fuelled the previous unsustainable bubble,” says Plumb. Going forward, the Investor Protection Law and the Code of Corporate Governance for Developers were announced by the Dubai Land Department in 2012. “While neither has yet been enacted as law, [these regulations] show a clear shift in government thinking towards better investor protection and the avoidance of another real estate bubble,” says Plumb.

Colliers’ Albert adds that an overall effect of the new regulations is an increase in the time required to complete a sale, significantly reducing the opportunity to “flip” a property. With the new mortgage law and the increase in property transfer fees, costs for entry into the market have also risen, limiting the number of investors entering the market. Today, “speculators are focusing on a single asset rather than spreading their risk over several different off-plan products,” Albert says.


For JLL, funding of real estate is another major thing that has changed following the crash, based on lessons learnt from the past. “Given experiences of the previous boom/bust cycle, there remains caution towards the real estate sector from both banks and potential off-plan purchasers. Banks remain wary about lending on real estate developments at a time when they still have to make major provisions against nonperforming real estate loans from the last development boom. Given this and the tighter restrictions on ‘off plan’ sales being imposed by RERA, the level of available finance is likely to act as a natural anchor, limiting the number and timing of the announced projects that actually proceed,” Plumb explains.

‘Smarter’ developers

Lastly, JLL notice a more balanced proportion of supply and demand in today’s market than in previous boom times. “Encouragingly, there are indications that developers have recognised the need to adopt a more long term and coordinated approach, with far more emphasis on phasing supply in line with levels of real demand, rather than developing too much real estate too quickly,” Plumb says.

Mat Green from CBRE agrees that the demand and supply fundamentals are also very different, with occupier demand remaining buoyant despite a slowdown in residential sales activity. “Whilst residential supply levels are increasing, they are still a fraction of the supply that was delivered during 2007 and 2008 when around 90,000 new units were handed over during just a 24-month period.

On a broader scale, Green says that today’s local economic environment is far stronger, with forecasts of around 3.5 % GDP growth for 2015, while it is also necessary to consider the global context, “which, whilst not without challenges, is certainly far more positive than during the pre-crash environment,” he says.

In the words of Colliers’ Albert, “the lessons learnt by the crisis have created a more cautious investment environment, while supportable demographics, demand and a strong GDP, have replaced speculative optimism.”

New Impetus for Office Market

Dubai’s office market is being driven by the continued expansion of the local economy, most importantly by growth of the non-oil sectors.

Furthermore, the emirate is also benefitting from its position as the headquarters location of choice for global corporates servicing the wider Middle East region, says CBRE’s Green.

JLL’s recently published MENA Occupier Sentiment Series report states that, amidst recent political and social turbulence across MENA, the UAE has emerged as a ‘safe haven’ within a volatile region. Consequently, “Dubai has cemented its place as the preferred business and financial centre within MENA” and is “expected to consolidate its position as the favoured location for corporate occupiers in the MENA region over the next three years.”

According to JLL, the expansion of the financial services sector will act as a further driver of Dubai’s office market with the DIFC having recently announced an aggressive expansion plan, namely to triple its office space by 2030, which is “based on aggressive expansion of Dubai’s role as financial centre for the ‘global south,’” so Plumb.

Interestingly, JLL tip potential for new business in Iran likely to be the major driver of office demand over the second half of 2015: “Corporates position themselves to take advantage of the business opportunities created by the relaxation of sanctions [in Iran]. Dubai will be a major winner from this trend,” says Plumb.


According to CBRE, occupier demand in the residential and office sectors remains quite strong which is a positive indication for the market and broadly reflective of the economic situation, which still portrays positive GDP growth for 2015.

Colliers anticipate a further softening of residential property prices in 2015, particularly in the properties priced over AED 5 million, says Albert.

Speaking about challenges, Albert says these constitute the impact of oil prices, the fall of the Russian Ruble and the impact of the continued conflict in the region. On the positive however, “the potential lift of sanctions on Iran may have a positive effect on the property market,” Albert adds.

CBRE’s Green adds that despite the external challenges such as low oil prices, regional conflicts, and currency fluctuations, “the overall outlook for the medium term looks more positive, with any downturn viewed as relatively short term and certainly not comparative to events during 2009.”

This article is supplied  by;

Cityscape magazine is the Middle East’s leading monthly real estate investment title and is owned and published by
Informa Middle East Limited. For more information, please visit www.cityscape.org

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