Text: Helena Kryukova WHEN WE INTRODUCE THE CITY OF THE FUTURE, THE FIRST NUMA COMES DUBAI. THE SAME CONCERNS AND THE EMIRATE REAL ESTATE MARKET: OVERCOMING DIFFICULTIES, IT RETURNED TO THE FUTURE OF SURE DEVELOPMENT, NEW FANTASTIC PROJECTS AND RAPID GROWTH FROM INVESTMENT IN INVESTMENT.
Dubai regularly holds leading positions in the ratings of priority investment in real estate investments: in the Savills rating, the emirate took the second place in the world in terms of attractiveness for housing investments, and the Knight Frank rating completely predicts that Dubai will soon be ahead of London by this indicator. world capital of investment.
Supply and demand - on the scales
The choice of investors is not surprising, because in addition to the main factors, such as a high level of return on assets, the safety of investments and the rate of their return on investment, the emirate also constantly appears in the lists of cities with the most unusual, interesting and significant real estate projects, such as the Dubai South aerotropol project ( formerly Dubai World Central), named by Knight Frank experts as one of the five most important urban development projects in the world for real estate investments.
And also, of course, MBR City - District One with its seven kilometers of artificial lakes Crystal Lagoons and the world's largest artificial beach, Aladdin City complex in the heart of Dubai Creek, inspired by traditional Arabian culture, three theme parks under the general name Dubai Parks and Resorts , the Bluewater Island artificial island development project with the highest Ferris wheel in the world, Dubai Eye, the large-scale Dubai Creek Harbor complex, the gigantic Dubai Frame, and the Deira Islands island development project. And this is only part of those amazing projects that will appear in Dubai on the eve of EXPO 2020.
But this whirlwind of new projects, which so quickly captured Dubai, could not but cause embarrassment among many analysts who are used to seeing pitfalls in everything, especially in combination with a decline in activity in the real estate market and a visible reduction in prices. Well, let's try to clarify this overall picture of a fantastic future.
The main stumbling block in various attempts to give as clear a forecast as possible for the future development of the housing market in Dubai was the real number of objects ready to enter the market in the near future. At the beginning of the year, the scope of analysts in this regard was quite large: without embarrassment, they stated that 30,000 housing units could very well replenish the market already in 2015. Then the forecasts became a little more modest: someone promised 25,000 new objects in 2015, others took a more extended time frame, so as not to be fixed on the current state of affairs, and called the figures of 70,000 objects until 2018, or, conversely, narrower - 6000 objects for the second half of 2015.
All this could not but cause confusion among investors and confused some potential buyers, after which the major market players themselves, including leading developers such as DAMAC and Union Properties, made statements saying that supply and demand were still balanced, but with a tendency to a predominance of demand.
Later, official statistics were added to these statements: despite the promised 25,000 new properties, no more than 10,000 housing units will be commissioned in Dubai in 2015, because the developers themselves understand the impact of the supply factor on the general state of the market and do not strive for it glut, inhibiting the commissioning of new facilities. According to the Dubai Statistics Center, Dubai’s population growth in the coming years will be 5-7% per year, and housing will increase by 2.2% per year, so the supply and demand balance will tend to prevail in future years.
The fact that the demand for housing in Dubai, and now, and in the future will be significantly ahead of supply, analysts and market participants unanimously speak. So say the head of Union Properties Khalid Bin Kalban, the head of DAMAC Zayed ElChaar, as well as analysts from Land Sterling and Bayut. And finally, the final point in these disputes was set by the recent official report of the Dubai Land Department, which states that in just nine months of 2015, the emirate concluded 33,907 real estate transactions, which indicates a steady increase in buyers' interest in the market.
For the personal funds of buyers during this period, real estate was sold in the amount of US $ 21.24 billion, and for credit - in the amount of US $ 25.59 billion. Thus, it is also clear that the popularity of housing mortgages in Dubai is growing every year.
New rise - in six months
Over the past two years, the total value of real estate sold in Dubai for each subsequent quarter has grown steadily, on the basis of which it can be concluded that the local real estate market is developing steadily and steadily, said the head of the Land Department, Sultan Butti Bin Majren. However, it should be noted that the closer the end of the year, the more confident the forecasts of analysts and market participants sound about the imminent (perhaps already in the middle of next, 2016) Dubai property market return to its previous growth indicators.
Today, these more recently cautious and timid assumptions have turned into confident theses, supported by facts. The reason for the triumphant return of the market to its previous positions will be the intensification of processes in the region’s economy due to the status of a stable bay in the restless environment of other Middle Eastern countries, as well as its orientation towards 2020, when the World Exhibition will be held in Dubai.
Another important factor that is outside the real estate industry, but nevertheless will have a significant impact on its further development, has been the recent lifting of economic sanctions from Iran, promising the UAE and, in particular, Dubai a powerful additional financial incentive to expand as a minimum of US $ 13 billion in annual trading profit. According to IMF estimates, the annual increase in GDP in the United Arab Emirates only due to the lifting of sanctions against Iran will be at least 1%, plus an annual growth of 3% over the next three years.
Focus is on the rental market
Another sector of the real estate industry, attracting increased attention of analysts and investors, has become in the last six months, the housing rental market in Dubai. In this field, as in previous months, increased volatility is observed, however, one thing is certain for sure: the growth in profits from investments in Dubai real estate continues. According to Phidar Advisory’s House Price Indices, returns in the Dubai apartment segment have risen to a record high of 7.5% over the past three months, while villa returns have risen to 4.8% along with lower prices in the sales sector and continued or rising prices in the rental segment.
The fact that the growing rental income, combined with the status of a safe investment harbor inherent in Dubai, form a rather optimistic future for the real estate construction industry, is also indicated in the latest report of the international rating agency Moody's and in an analytical report from Financial Times, whose experts called loyal foreign investment legislation and transparency of regulatory standards, that is, safety and comfort, are among the two most important factors for the further development of the Dubai housing market I.
According to another consulting agency, Land Sterling, the cost of renting studio apartments in affordable areas of Dubai increased by 13% in the third quarter of the year alone. At the same time, the increase in the cost of renting housing with a larger area is inversely proportional to the size of villas and apartments: one-bedroom apartments have risen in price by an average of 5-12% per quarter, depending on the area, and elite housing, on the contrary, has become cheaper for tenants. At the peak of popularity among investors and tenants - inexpensive apartments of a small area in the developed areas of Dubai. According to Propertyfinder, the most sought-after tenants in Dubai fall into the price range from US $ 13,500 to 40,000 per year.
Thus, Dubai remains one of the most expensive cities to rent in the world. This was confirmed by a recent UBS rating study entitled Prices and Earnings.
However, Dubai managed to get into the top four cities with the highest rental rates mainly due to its elite real estate sector, while recently both the government and the developers themselves have focused on the other end of the spectrum - the affordable housing sector.
This trend, which has formed in the first half of the year, continues to this day. According to the JLL definition, affordable for Dubai is considered to be real estate with an average value of US $ 215,000 in the sales segment and about US $ 19,000 per year in the rental segment. It is this type of housing in Dubai that is currently most lacking, since at least 40% of the total population, or 820,000 households, are potential buyers and tenants of such real estate, the JLL report says.
New investment opportunities will attract a completely new type of investors to Dubai who are interested in the category of low-cost real estate, and thanks to them, in the next seven or more years, according to analysts at Knight Frank, Dubai expects a stable and confident development of the housing sector.
For more information about purchasing and managing real estate in Dubai, contact IMEX Real Estate at 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].
