KAZINFORM - The real estate market is currently enjoying an unprecedented boom
in the United Arab Emirates and has been rated as the most active of all real
estate markets in the Gulf Cooperation Council (GCC) region.
The Global Competitive Report 2004-05 ranking issued recently by the World Economic
Forum, UAE is among the most competitive countries in the world and a haven
The change in laws on foreign ownership of real estate in emirates like Abu
Dhabi, Sharjah, Ras Al-Khaimah, and recently Dubai also signals the intent toward
reaching the stage of being seamlessly integrated with the global economy, Kazinform
has learnt from The Arab News.
Key drivers of the real estate sector in UAE have been high population growth
rates, a youth-heavy age profile, huge inflows of expatriates, higher liquidity
levels in the region, and proactive government policies, according to a report
by the Kuwait-based Global Investment House (Global).
Dubai has been by far the largest emirate in terms of real estate activity,
and has also witnessed the highest escalation in rents, and prices. Currently,
demand is huge and supply is not enough to cover this demand in the residential
and commercial segments considering the economic boom, the high growth of employment,
the regularity at which foreign companies are setting up base in the country,
and the huge inflow of expatriates. Although, the Dubai property market is crowded
with several mega projects in the pipeline signaling an expected oversupply
situation, most of the projects are still under construction.
The Global report, which was released yesterday, said, “Constant delays
in the delivery of new property has fuelled the demand for available property,
and hence led to more appreciation in rents and prices. In some cases, prices
and rentals have increased by 40 and 50 percent over the last few years in Dubai.”
However, rents in the residential segment are not expected to appreciate at
the same levels witnessed earlier due to the recent 15 percent cap on rental
increases imposed by the government. The report added “The stabilization
in prices to occur once the projects in the pipeline come into completion which
are due within two or three years.” Rental Yields for property in Dubai
ranges from 7-10 percent.
Currently, there is supply deficit in Abu Dhabi allowing huge opportunities
for developers. The Global report said that “The pent-up demand would
require enormous supply to be satiated, which implies a more secure story for
developers built on latent demand rather than external demand as in the case,
to a certain extent in Dubai.”
The office market is currently facing a shortage in Dubai. There is a lot of
supply coming into the market, mainly in the construction of high end office
space, which is in high demand currently.
The focus on tourism in Dubai has also attracted investments not only in hotels,
but also large scale retail developments. However, though the emergence of sprawling
malls adds to the allure of Dubai, the numbers point toward a looming overcrowded
situation. The per capita retail space in Dubai is estimated to be four times
that in the US.
The rapid increase in tourist flows has rendered hotels in acute short supply
in Dubai. The supply-demand mismatch led to a steady increase of occupancy levels.
The trend of having more guests from the richer Western world bodes well for
hotels in Dubai, which is already facing an abundance of riches. A large increase
in supply is warranted to match the projected increase in demand in the next
few years. The situation is pretty much similar in Abu Dhabi too, where tourism
is expected to pick up once the major developments in the investment zones are
completed. The number of tourists visiting Abu Dhabi is expected to triple from
the current level of 1mn by 2010.
Similarly, Ras Al-Khaimah is marketed as a tourist destination and would offer
plenty of opportunities for more hotel developments. However, while there is
a perceived difficulty in obtaining hotel rooms across the emirates, it should
be noted that tourists are left with little choice other than four/five star
hotels or low end hotels in the unorganized segment. There is a clear cut gap,
which would provide an opportunity for the organized budget hotels to come in.
Northern emirates of the UAE, especially Sharjah and Ras Al-Khaimah had by
far remained in the shadows of their bigger and more famous counterparts, Dubai
and Abu Dhabi.
Furthermore, allowing foreign ownership in emirates such as Abu Dhabi, Ras
Al-Khaimah, and recently Dubai has boosted investors’ confidence in the