Several debates have made over recovery of Dubai real estate and most of the debates clearly mentioned that asset market has been showing gradual recovery in prime locations offering luxury lifestyle amenities. In fact this concluding statement is true to some extent, because location and availability of daily life facilities are the main factors to make any property most demanding among investors and tenants. City economy was badly hit by economic recession in year 2008, Especially, Dubai real estate sector got badly affected as property prices fell down to 60% of its actual price. Sami al-Qamzi, (Director General of the Dubai department of Economic Development) shared his views about overall recovery of Dubai from global economic recession in year 2008. He mentioned that every other business sector had started showing some level of progress in year 2010 except real estate sector that further showed downfall of 5%. Primary reason of this delay in progress of property sector is entirely dependent on supply and demand.
Role of Abu Dhabi financial support in recovery process
Continuous depression of Dubai real estate market dragged attention of Abu Dhabi Government and they provided financial support to complete Dubai World Group (DWG) and projects of its subsidiaries. Financial support has comforted the market and played major role to facilitate creditors and investors to regain confidence. Later in late 2010, UAE’s major developer Nakheel also announced to start construction work on many of it incomplete master planned projects. In addition to financial support, Emirate’s economy displayed excellent recovery and robust performance in tourism, retail, hospitality, logistics and commerce sectors have made it possible to generate GDP of 4.5% in 2012. City’s high standard of living, political stability, negligible crime rate and state of the art luxury infrastructure facilities also took a great share to progress Dubai’s economy. Moreover, the city has been recognized for its luxury hotels and wide range of short term and long term rental accommodation it offers for local, expats, travelers and holiday makers.
Analysts’ prediction over recovery trends of market
Real estate analysts predicted that good economic growth in 2012 has given positive signals for progress of Dubai real estate in 2013. Investors and developers are regaining their confidence during last six months of year 2012. As major developers have announced to restart work on the projects that were being stopped due to oversupply. Additionally, several new projects have also been launched; that has showed that asset market is progressing gradually as developers get buyers and investors for their upcoming projects. Despite good progress rate of Emirate’s real estate sector, developers have been showing cautious behavior. As they have learned some lesson from their previous mistakes. Now developers are thinking for long term benefit and don’t show unnecessary interest to quickly construct numerous real estate projects. Although increased confidence improved market conditions but this time it doesn’t generate negative energy in any specific sector. For 2013 it has predicted that all sectors of real estate market will show some percentage of progress. Same way property buyers are not showing over excitement in making numerous property purchases with aim to earn profits.
Below is the brief description about performance of different real estate sectors in Dubai during it gradual recovery in 2012.
- Hotel- Hotel sector is on top in terms of performance as increased travel and tourism in Dubai has successfully lead to hotel apartment boom in the region
- Residential Units- Variable pattern of performance has been observed for residential units for Emirate. The difference is due to the location and type of residential unit i.e. villa, apartment, townhouse, studio or serviced apartments. Dubai Marina, The Greens and Palm Jumeriah are the leading Dubai communities showing high rise in rent and buying prices for assets.
- Retail-Excellent growth rate of travel and tourism sector and enhanced consumer confidence in the region have benefited retail sector. Dubai Mall and Mall of Emirates are expected to remain highest performing units of this sector in 2013.
- Office-Market studies have revealed that, commercial or office sector is not showing good recovery as compared to other real estate sectors of the emirate. It is due to oversupply of new commercial projects in year 2013. Only rent rate of commercial office space in preferred location like Sheikh Zayed Rd, Downtown and free zone buildings in TECOM are showing stability and only limited recovery can be observed in rent rate of commercial units in these areas.
- Industrial-This sector is least effected over recent years because units have been occupied by single long term tenants. Moreover, high volumes of shipments through Jebel Ali Port and the new Dubai World City have greatly increased the demand for warehouses and logistic storage space in major industrial location in southern region of Dubai.
Gradual recovery of Dubai real estate sector has only become possible due to collective efforts of State government and developers, who have made strategic efforts to attract traders, tourists and second home seekers towards Dubai.