Dubai continues to grow despite global recession

With the stock markets hitting the US economy hard, the turmoil has crept into the economies of several countries. But UAE is not expected to enter recession since the Government has already taken preventive steps. One of the country’s officials, Al Shafiei, remarked:

“Other countries waited a long time before doing anything, but in Dubai, they (government) have already taken preventative steps”. Salem Al Shafiei, continued and said “It is a credit to the leadership that there hasn’t been a significant impact on the UAE economy and Dubai in particular. Dubai’s housing market is transforming from an often-greedy, speculative nature to a consumer-orientated market. This makes the economy healthier and will allow the mid-income bracket to live here”. Al Shafiei has also assured that their Government is optimistic and has taken appropriate steps for the current situation, even though the current economic condition is not well.

“It is normal that we be affected by what is happening in global markets but there are elements of confidence and protection that are relevant to the particulars of our economy and its diverse base of income,” Mansouri, another UAE government official, was quoted as saying.

Also, Tessa Morris, marketing director for the organisers of the R&R Property show at DSL exhibitions said “The UAE is unique in that demand for local property has not dried up and sales continue to be strong”.
Experts still suggest the real estate will outperform for up to two to three years and say what’s happening in America on mortgage issue will not necessarily touch UAE, as they have calculated all possible risks and have measures ready to ensure nothing will happen here to a large extent. Andrew Chambers, managing director of Asteco, a Dubai-based property services company, is among those who see property prices as more likely to level off than fall.

“People come to Dubai because of many factors – the working environment, job opportunities, safety and security, Dubai holidays and the fact that there is no tax,” he says. “All these keep demand high. In America, 180,000 jobs have been lost. Here, it’s the opposite: there is a shortage of skilled people.”

The Growth of Dubai and UAE

The recently held 7th R&R Local Property Show at the Crowne Plaza, was the biggest property exhibition held in Oct’08, attracted over 60,000 visitors from 150 countries. These people were far from being affected from the financial crisis all over the world. According to the experts at least, prices are not dropping and developers are not leaving the market – although it’s becoming more expensive for them to fund their projects. In addition, new regulations on off-plan selling, introduced in an effort to prevent rampant speculation, as well as the merger of two mortgage providers, mean that the market is not slowing, but rather “maturing”.

Dubai, UAE

Having talked about the strong protective Government policies, the Dubai real estate market is still vulnerable to the international downturn. As transportation and tourism are the region’s premier businesses, it is by definition more entwined with the global economy. And in tight times, Dubai lacks the windfall oil profits that have enabled sister emirate Abu Dhabi for example, to amass a financial cushion in sovereign wealth funds totalling hundreds of billions of dollars. The inevitable re-sale premiums on new property in Dubai have started to decline. This is going to have quite a substantial impact on the market as speculators find their profits squeezed. Since the iconic Burj Dubai apartments were sold, overnight during its launch last autumn, are now being offered at the wafer-thin premium of 6%. By the time transfer charges and agents fees are paid there will be almost nothing left for the speculator. With Dubai rental yields presently in the 7-9% range this should not give real investors too many sleepless nights. However, the day of the speculator is almost over and this will now become a market driven by more fundamental forces. Such factors as supply and demand, and the cost and availability of mortgages will now matter far more in Dubai. A long-term property investor can sit out the peaks and troughs and see his or her property rise in value over the years thanks to rental inflation and domestic economic conditions. And in the case of Dubai an individual long-term investor also saves his or her large rental payments by paying off a mortgage. Ambitious Gulf developers have unveiled several new projects, but Gulf stock markets have been reeling from Europe’s spreading banking crisis and falling global markets. Speculation intensified lately that the government would force Dubai developers Deyaar and Union Properties to merge as financing conditions worsened, analysts and traders said.

“Sentiment is a critical component when considering the health of any market. It is an important barometer, a key assessment criteria for any investor and the ideal gauge for considering future prosperity,” said Blair Hagkull, managing director at JLL for Middle East and North Africa

Apart from the current global economic condition, Dubai is today one of the fastest growing regions in terms of real estate. There are a wide range of properties to choose from, with unparalleled features implemented in each of them. The Dubai real estate consists of apartments, offices and commercial spaces to signature villas, and has become a major attraction for the international buyers. Despite the woes it is expected to grow!