Elite Traveler January-February 2016

INFLUENCE PROPERTY COLUMN

JuliaWheeler on Dubai real estate Confidence in the Dubai propertymarket is booming once again. But forecasts aremixed andDubai must take care that self assurance doesn’t spill into hubris, warns JuliaWheeler, former BBCGulf correspondent

demand-driven attitude of ‘build it and they will buy’ has been forced to give way to an understanding that buyers are doing their homework and that quality is a major driver in decisions. Some analysts predicting a downward trend in prices for the coming year are optimistic about growth between 2017 and the inauguration of the hard-won Dubai Expo in 2020. If so, 2016 is a window of opportunity for investors. Others say the bounce from that six-month event was already factored in during the hyped run-up to Dubai’s successful bid being announced and was a good part Touted as generating 25 million visits, 70 percent of them from overseas, the Expo is guaranteeing major investment in infrastructure that can only benefit the market. Much of this is focused around the site of the event that has become known as Dubai South, and now branded The City of You. The Expo has brought confidence back to the city but Dubai must take care that its self-assurance does not spill into the hubris of the mid noughties. Less straightforward than the Expo factor in the market’s thinking is the impact of Iran opening up after sanctions; HSBC among others has pointed to a resulting rise in demand. As Iran’s second biggest trading partner, the United Arab Emirates (of which Dubai is one emirate) is well positioned to benefit but, ironically, sanctions being lifted will make Tehran less dependent upon its southerly neighbor. Iranian cash will move overseas, but may decide to skip emerging markets for the US and Europe for reduced volatility and political risk. Forecasts so often carry as many caveats as they do statements of fact but a decade of data for villas and penthouses, commercial property and apartments, at least makes Dubai ‘Dodge City’ rather than the Wild West. Still, one mantra hasn’t changed and is as relevant in Dubai as in Las Vegas; only risk what you can afford to lose. Julia Wheeler was BBC Gulf correspondent based in Dubai between 2000-10 of the reason for the heat in transactions during 2013.

Some analysts are optimistic about growth between 2017 and the inauguration of the hard-won Dubai Expo in 2020. If so, 2016 is a window of opportunity for investors

“There’s no advantage to being in on the ground floor,” cautioned my usually savvy friend when Dubai first talked of opening up its real estate market to foreigners in 2002. “Better to wait and see where it goes.” How wrong he was. The signature villas on the Palm Jumeirah, the iconic island whose fronds branch out in the shape of a palm tree, are today advertised for between $5.7m and $8m, but they were a steal at $1.27m when first offered for sale off-plan in 2003. Back then, it was more than a punt. Rumors abounded that the waves of the Arabian Gulf were eroding the structure’s sand faster than the 24-hour-a-day dredgers could stop it and there was no indication of how utilities would reach these future properties rising from the sea. In the dozen years since then, the market has been arguably the most volatile in the Middle East. The cycle of boom, bust, back and, now, bumpy, has been as frenetic as anything you are likely to experience strapped into the Formula Rossa rollercoaster, just down the road at Abu Dhabi’s Ferrari World.

But, if buying property here today remains a gamble, some of the odds have certainly been shortened. Knight Frank’s estimated 12.2% drop in Dubai real estate values in the year to June 2015 points to the biggest decline among the 56 residential markets it tracked around the world. A decline, yes, but the ride is nothing like as steep as in 2008-9, partly because it is being fueled by global uncertainty rather than the fundamentals of Dubai’s property market. By 2009 a lack of regulation, rife speculation and the wishy-washy promises of small and unsecured developers had led to tears. Now, there are more rules on the books. To smooth the growth curves and avoid another bubble, regulators doubled the cost of transaction fees and brought in caps on mortgage sizes to reduce speculation. There has been a significant consolidation among developers with the government-backed Emaar, and DAMAC leading the way on off-plan projects. This, and the increasing maturity of the market, has focused the emphasis on prime real estate. The