Dubai's Population Guarantees Healthy Returns

It is widely acknowledged that Dubai property creates excellent profit returns and will continue to do so. The International Investment Property Network (IPIN) takes a look at the possible doubts more cautious investors may have today.

Over Saturation

The hype surrounding Dubai has obviously increased the number of property developments now under construction. However, the fact remains that far less is being produced than originally promised by enthusiastic developers, mainly due to lack of manpower and materials. Meanwhile,  the Dubai Government is issuing between 1,000 and 1,200 visas every day - that’s a minimum of around 500 to 600 properties that need to be built a day (assuming all visas were issued to couples)., however numbers could reach 1200 properties needed to be finished on a daily basis.

Exit Strategies

In absolute terms, Dubai property prices are low in comparison with other cities across the world with similar salary levels and infrastructure.  In addition, Dubai still has an undeveloped niche market in real estate: holiday lets and fractional ownership. These options pose excellent scenarios for the property investor wishing to take advantage of capital appreciation over time as well as earning rental yields.

IPIN portfolio advisor, Luke Smith, explains Dubai re-sale options to investors: “With so much Dubai property being off-plan there is a huge demand for resale properties.  Many people are relocating there to work and cannot wait for off-plan properties to be completed. For this reason Dubai’s resale market is one of the strongest for an emerging market”.

AME info, a comprehensive online Middle East business news source, explained in a recent article that “Rents (in Dubai) are unlikely to fall in a booming market, so it is more likely that rising capital values will gradually pressure yields down towards global levels.”

But, who will you rent your property in Dubai to?

IPIN advisor Luke Wilson goes on to explain that: “Due to the demand for rental properties, most developments will come with guaranteed rental yields. However, if this is not the case, you have to remember that out of the top 100 companies in the world, 82 of them are setting up bases in Dubai. Imagine the number of employees that need to rent properties. Add to that the workers in the service and tourism industry, builders, airline employees, cab drivers, holiday makers, residents.....” 

The Dubai government strongly encourages new employment opportunities, with the creation of the Dubai Technology, E-Commerce and Media Free Zones (TECOM) which include Media City, Knowledge Village and Dubai Internet City, the latter being the workplace to over 8,500 employees. These factors are sure signs of continued growth in demand for rentals and property in Dubai.

Safety

Dubai enjoys zero terrorism threat and has no connections with US or Iraq.  What’s more, the emirate has been voted safest city by Interpol for the past 5 years.

As far as investment safety is concerned, Dubai offers 100% freehold ownership for nationals and foreigners. Its Escrow law protects the investor more than any other country in the world. Today, Dubai enjoys world-class laws, strongly-led regulatory authorities and a state-of-the-art land registry.

Finance Available

Regular finance of up to 70% of the property’s value is available to non UAE residents at competitive rates (7-8%) on most projects, completed or off-plan. However, interest rates have yet to adjust to the recent cuts made by the USA, mainly as the currency is pegged to the dollar.
EFG Hermes, the Arab world’s premier investment banking firm, recently published a study on the blossoming UAE mortgage market which points to a gigantic increase by 2012, stating: “Over the next 5 years we estimate a population increase of 1.4 million people, implying property transactions of $187bn. Assuming only 21% of this is financed this indicates a market size of $44bn, up from the estimated existing market size of only $4.4bn.”

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