LARGE SCALE EXECUTION

Text: Helena Kryukova

The spring of 2014 showed: in the first quarter, Dubai's new real estate endeavors had a good start. Five months from the beginning of the year proved that the pessimistic forecasts of analysts regarding threats to the stability of the real estate market in Dubai and the UAE as a whole have not paid off.

Despite the rapid rise in housing prices, the investment potential and prospects for the development of the real estate sector in Dubai are very clear, and moreover, positive. Preparations for "EXPO2020", the embodiment of the most daring, sometimes simply fantastic plans of architects, new records and achievements, growth in all areas of the economy, widespread improvement of infrastructure - these are just some of the plans that were implemented in the first half and will still be implemented in Dubai in the second half of 2014.

LANGUAGE NUMBERS

The review of the state of the Dubai real estate market at the end of the first quarter of the year should probably begin with the most recent statistics published recently by leading world and local consulting agencies and analytical bureaus.

According to the report of the Dubai Land Department, the total number of real estate transactions in the first quarter of this year increased by 38% compared to the first quarter of last year, and the total amount of transactions amounted to US $ 16.6 billion. Such indicators indicate a confident and stable increasing investor interest in the Dubai real estate market. According to the Department’s expectations, the next three quarters of this year will be no less active, and the development of the real estate sector will be supported by the launch of several large projects at once in preparation for the "EXPO 2020".

In quantitative terms, according to the report, the number of real estate transactions increased by 11% compared to the same period last year and amounted to 15694 registered transactions. Of these, 3482 real estate transactions were concluded on mortgage terms, and their total amount amounted to US $ 7.62 billion. In general, the fact that housing prices are still far in many areas of Dubai is also in favor of the overall stability of the Dubai real estate market. do not reach the maximum indicators of 2008. Thus, according to the JLL analytical agency, real estate in Downtown is still 7% cheaper than in 2008, and the price of housing in Business Bay and JLT is 13% and 2% lower than the peak value of 2008, respectively. The cost of housing in The Greens is 17% lower than the maximum in 2008. Investors (13 thousand people) invested so much US $ 9.5 billion in Dubai real estate in the first quarter of the year, which is 57% more than in the first quarter of 2013. US $ 12.2 million and US $ 16 million - such amounts cost the most expensive villa and the most expensive apartment in Dubai, respectively, sold in the first quarter of 2014.

The most expensive villa was a villa with a total area of 1111 square meters on The Palm Jumeirah Island, and the most expensive apartment was the apartment in the iconic Burj Khalifa (US $ 15386 per square meter). In terms of these indicators, the current year is already ahead of the past year, 2013: for comparison, the most expensive apartment sold in 2013 was the apartment in the Fairmont The Palm complex worth US $ 11.43 million.

According to data from real estate agencies and real estate agencies such as Reidin and Propertyfinder, in addition to Dubai Marina, Downtown Dubai, Palm Jumeirah and Jumeirah Lake Towers still occupy the first place in the list of the top 10 most popular areas of Dubai. According to the Reidin portal, prices for villas in Dubai in February rose by 3.28% in monthly terms and by 19.5% in annual terms. And according to the forecast of HSBC Global Research this year, property prices in Dubai should rise by another 10-15% on average. These figures also indicate the growing stability of the real estate sector.

FORECASTS AND PROSPECTS

To date, the current year 2014 has almost reached its zenith, so it’s now possible to say with great certainty which analysts' forecasts regarding the future real estate market of Dubai and the UAE look realistic, and which turned out to be somewhat exaggerated.

Let's start with the latter. No doubt the fears of many experts about the destabilization of the real estate market have been exaggerated. Too rapid growth in housing prices at the end of last 2013 made some experts make even bolder forecasts for the year 2014, foreshadowing almost 40% increase in housing prices. However, at the beginning of this year, more "seasoned" experts, evaluating the efforts of the government and developers' associations to restrain speculation, came to the conclusion that real price increases are unlikely to exceed 10-20%.

Most analysts, in the end, agreed that the next "financial bubble" this year should not be expected. Thus, the reports of the analytical department of HSBC Bank and the consulting company JLL say that the growth in the cost of residential real estate in Dubai this year will be 10-15%, and the profit indicators that such real estate can bring will remain at the level of 4-5%. According to JLL, the real estate market in Dubai in the next two years will replenish by 390 thousand new units of housing, which will increase its existing volume by 9%. Most new residential properties will be built in the south and west of the emirate, in areas such as Mohammed Bin Rashid City, Business Bay and Dubailand. Separately, a few words should be said about rental housing.

According to the report of the same JLL, the cost of renting real estate in Dubai will inevitably increase, despite a slight slowdown in price increases this year, most likely by about 10-20%. JLL analysts give such a forecast even despite the fact that the residential real estate fund is expected to increase by 25 thousand units per year. The overall rental index from JLL for the first quarter of this year grew by 7%, and by 23% for the year. The apartment rental index grew by 26% per year, and the villa rental index - by 12% per year. Most of all, rental prices rose in such popular tenant areas as Sports City, where rental prices increased by 41% over the year, International City (35%) and Discovery Gardens (33%), while rental prices in such areas like Downtown Dubai and Dubai Marina were significantly lower - 24% and 21% for the year, respectively. In the rental segment, there is also a strong tendency for tenants to move from Dubai to other, more affordable emirates such as Sharjah and Ajman. Recently, rental prices, in connection with this relocation, began to rise even in such emirates as Fujairah.

SCIENCE AND REALITY

Speaking about forecasts and prospects, it is impossible to ignore the traditional craving for Dubai to translate the most fantastic ideas and plans into reality. So, according to the assurances of the UAE authorities, 2014 promises to be the year of megaprojects in the construction of social, cultural, tourist spheres and, importantly, infrastructure facilities. The three most large-scale infrastructure projects, the creation and updating of which Dubai plans to use a budget of US $ 1.92 billion, will be the start of the construction of the Dubai Canal, the construction of the Al Ittihad Bridge and the project of laying the lines of the Dubai tram extremely significant for the city, the total length of which will be 14.6 kilometers. All three projects will significantly affect the level of real estate prices in the areas where these projects will be implemented.

Among the projects closest to science fiction this year will probably be the construction project for the Aladdin City in Dubai Creek on a 450-meter stretch. The "city" will consist of three bizarre towers connected by passages with moving floors. The design of the towers is inspired by tales of Aladdin and Sinbad the Sailor. This project as a whole will have great cultural and historical significance and promises to transform the face of Old Dubai, becoming a new must see object for tourists.

The new building of the Dubai Opera with 2000 seats in the form of a ship, which will be built in the Opera District of the same name in the heart of Dubai - Dubai Downtown, will also amaze with its scope and design. Significant shifts were outlined this year on the man-made islands of The World, on one of which, the island "Heart of Europe", it is planned to recreate the atmosphere and even the climate of European streets. Finally, literally, the cosmic scale has the most recent high-profile statement by the UAE authorities about plans to build a launch pad for spacecraft in Abu Dhabi. This project is planned to be implemented jointly by Virgin Galactic and Aabar Investments and completed by 2016. But, embodying the most daring projects, which often seem to be something from the realm of fiction, the UAE authorities, nevertheless, firmly stand on the basis of reality. This is proved by official Dubai development plans. According to them, in the near future the main sectors in terms of development prospects will be the sectors of commercial and industrial real estate, to which the Government of Dubai will provide its support. In addition, it is planned to pay special attention to improving methods of regulating the rental market in order to keep prices reasonable and to prevent speculation in the real estate sales sector.

EFFECTIVE REGULATION

Among the other steps that the Dubai government intends to take in relation to the real estate market are the use of fiscal disciplines in relation to rental operations, the reorganization, if necessary, of the public sector structure and maintaining its scale within acceptable boundaries, and increasing the efficiency of government spending on real estate construction. Speaking about the activities of the official bodies, one cannot but mention the innovations of 2014 in the field of regulatory legislation. The innovations of the Dubai Land Department were aimed at improving the regulation of the Dubai real estate market and touched upon the unification of the forms of contracts defining the relationship between the three parties to the purchase and sale transaction: a broker, a buyer and a seller. The so-called forms A, B, and F were unified. These innovations came into force on May 1.

Developers also do not lag behind state bodies in terms of successively limiting opportunities for speculation in real estate and, one by one, introduce new rules for the resale of unfinished housing. So, Emaar and Damac, and after them other developers, began to issue certificates for the resale of real estate only after paying at least 50% of the cost of housing, and in many cases this percentage becomes much higher. But sometimes developers nevertheless act by the method of encouragement in the fight against speculation. So, recently Emaar offered those customers who immediately pay 30% of the cost of housing and keep it in their possession until the end of construction, the priority right to buy property from the builder without waiting in line.

DUBAI AND ABU DHABI - GOOD NEIGHBORS OR COMPETITORS?

In general, it should also be noted in conclusion that the high investor and consumer interest in real estate was recorded in the UAE everywhere and was repeatedly confirmed by the figures of various statistics. A significant rise in the real estate market was observed in the first quarter of the year in the UAE capital, Abu Dhabi. Several leading developers here made a number of high-profile statements about the beginning of the construction of large projects. So, currently the capital of the UAE is leading in the pace of construction of commercial real estate: in the near future, 8 new shopping centers will be built here. And the new Abu Dhabi development plan until 2016 involves a complete reorganization of the social and transport infrastructure. The recent Cityscape Global Real Estate Exhibition in the UAE capital also attracted a record number of visitors, expanding significantly.

However, according to various ratings and reports, it is Dubai that continues to be the most promising business, cultural, tourist and financial center not only in the UAE, but throughout the Middle East. In many ways, this, of course, is facilitated by the expectation of the holding of the international exhibition EXPO-2020. In the first half of 2014, the Government of Dubai announced a series of measures planned for implementation in anticipation of EXPO2020. This includes the construction of water supply facilities, a compact development plan for the center of Dubai and focus on rapprochement with the capital of the UAE, Abu Dhabi.

Also this year, Dubai took the honorary third step of the podium in the ranking of the fastest growing cities in the world City Momentum Index from JLL, second only to London and San Francisco. Thus, we can say that in terms of achievements both Dubai and Abu Dhabi have something to brag about, and these good-neighborly emirates only contribute to the confident development of each other through a certain share of the competition present between the cities.

In general, the first half of 2014 was for Dubai another important step towards acquiring the status of not only the most dynamically developing city, but also the most comprehensively and steadily growing important center in the Middle East, where the UAE as a whole occupies a leading position as the safest and most a promising haven for investment and business in general.

You can get any additional information about the acquisition and management of your property in Dubai from the specialists of IMEX Real Estate by tel. in Moscow +7 495 5100008, toll-free number in the UAE 800-IMEX (800-4639) or by sending a request by e-mail [email protected]

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