Dubai looks all set to enjoy heightened investor interest
Dubai is poised to enjoy heightened investor interest as the emirate’s real estate recovery drives further inward investment, particularly from the GCC region and broader Middle East, more so in the backdrop of the city winning the rights to host the World Expo in 2020, a leading real estate consultancy said.
Referring to the results of 2013-14 International Private Capital Survey, Cluttons said in a recent market update report that high net worth individuals, or HNWIs, from Manama and Muscat favour Dubai over London as a primary global real estate investment destination, underscoring the heightened investor interest in the Dubai.
“We retain our position on the sustainability of the market. We believe concerns of the market overheating are likely to prove too negative given average residential values remain well below the market peak despite recent gains. More importantly, demand is primarily being fuelled by a growing population and rising employment levels,” Cluttons said.
The report argued that the recent steps taken by the UAE Central Bank such as the announcement of the federal mortgage caps and the Dubai Land Department’s recent doubling of property registration fees from two to four per cent are expected to act as dampeners to any speculation.
“We are already starting to see this having an impact on the total volume of deals. In particular, with loan-to-value ratios on second home purchases now fixed at 60:40 and 65:35 for nationals and expatriates, respectively, we anticipate further slowing in the pace of capital value growth. One further area we are monitoring is the collapse in the value of the Indian Rupee and its impact on buyer demand,” Cluttons said.
According to the Dubai Land Department, Indian nationals formed the largest proportion of expat residential buyers during 2012. There is however no evidence to suggest that capital flows may be redirected to India-based investments to capitalise on the weakness of the Rupee and this does not appear to have had an impact on overall buyer demand from this segment of the market as yet.
The report observed that with Dubai economy continuing to rebound, growth is being recorded across most of the emirate’s key sectors, which is translating into increased occupier demand, with a focus on key centrally located submarkets such as the DIFC, Downtown Dubai, Business Bay, Barsha and Jumeirah Lake Towers (JLT).
The report said Dubai’s economy continued to expand over the course of the summer, with most economic indicators suggesting robust growth in the key sectors of trade and leisure and hospitality. Tourist arrivals continued to swell, with hotel occupancy during August peaking at 72.6 per cent aided in part by the holy month of Ramadan moving into July this year.
Furthermore, tourist numbers over the first half of the year grew by 11 per cent to just over five million, while Dubai’s central role as the region’s trade hub continued to be bolstered by high levels of re-exports during the first half up 13 per cent on the same 2012 period.
“The rapid expansion of the hospitality and leisure sector, coupled with the surging visitor numbers has injected further momentum in to the emirate’s economy, with the real estate sector being a key beneficiary of rising confidence levels.”
The subsequent upturn in residential buyer demand has resulted in the announcement of several new large scale mixed use projects across the city, designed to compliment Dubai’s 2020 vision of playing host to 20 million tourists per annum and Dubai now elected to host the 2020 World Expo, Cluttons pointed out. Cluttons further noted that Dubai’s retail market is also seeing some benefit as a result of the improved economic conditions, with neighbourhood retail space recording increased demand. This is particularly evident in submarkets such as Al Wasl and the Jumeirah Beach Road, as both new and existing retailers are drawn towards growing affluent population centres.
On the supply front, developers are keen to cater to the needs of local communities and work is continuing on the expansion of The Dubai Mall, Dragon Mart, Mall of the Emirates and Al Ghurair Centre.
Meanwhile, new community malls such as The Pointe (Palm Jumeirah), Jumeirah Beach Village (Dubai Marina) and The Ribbon (Motor City) appear to be getting readied to meet current demand.
“We anticipate these new malls to be quickly absorbed into their respective communities with pre-lets likely for majority of the new space. The market is continuing to experience a steady stream of demand in both onshore and freezone locations,” it said.