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About Dubai & UAE Dubai is currently experiencing a price correction in both residential and commercial real estate. You can now expect to pay prices previously quoted in 2003. Please contact our office on +973 36613077 or email mail@veritaspropertyinvestments.com for an up to date listing of completed projects and resales at below developer prices. Build a vast city on a desert island. People it with the world’s tallest skyscrapers, the word’s biggest malls, the world’s lowest taxes. Drench the world with publicity. Will people come? The answer is – yes. And come with enthusiasm. It all began modestly, in 1997, with the foundation of two publicly quoted Dubai construction companies, Emaar Properties and Al Nakheel Properties. Within a year, work had begun on the Dubai Marina and on the Emirates Living Community Developments (The Springs, The Meadows, Emirates Hills, The Views). Initially, these developments had a poor take-up. Then in May 2002 the Dubai government announced that foreigners of any nationality would shortly be able to own freehold residential titles to these properties, instead of the originally-proposed leasehold titles. The same month Nakheel’s man-made island The Palm Jumeirah was announced, followed a year later by The Palm Jebel Ali, and then by a third island, Deira. Many other developers entered the market.This set off an enormous wave of buying. On 14th March 2006 came the long-awaited law legalizing foreign ownership in designated areas of Dubai. The law allowed foreign owners to register a freehold title with the Dubai Lands department, and to sell or lease the properties without restriction. The new law doesn’t assure owners the right of permanent residence, nor the right to work in Dubai. Europeans, including Russians, account for 20% of the buyers of all property categories (including offices). GCC, Arab nationals and UAE nationals make up 28%, Asians 40%, and Iranians 12%. A few highlights. The first Palm Jumeirah residents took possession in mid-2007. The ultimate luxury address for 120,000 residents, it will be connected by a 1.4km sub-sea tunnel to the mainland. There will be 20 hotels, including the US$600 million Trump International Hotel & Tower. Then there’s Dubai Waterfront, a giant crescent arching around The Palm. When it is finished, it will be larger than Manhattan, house 700,000 people, and have 12 kilometres, or 7.5 miles, of beachfront, 10 kilometres of canals, 200 hotels, and a harbour two kilometres wide. The city will have five major sections, the centrepiece being the Madinat Al Arab, a city centre with businesses, shopping and the elegant Al Burj, which in September 2007 became the world’s tallest structure, due for completion in 2008. Nakheel has spent about $4 billion on the infrastructure of the new city. The value of the land alone, before any improvements, was estimated to be around $30 billion. Another project is The Dubai Creek. This was the first city district of to be upgraded by Sheikh Rashid, the founder of modern Dubai. Now it will host the 70 million square feet The Lagoons, comprising seven landscaped islands linked by bridges, with residential buildings, shopping centres, office buildings and marinas. There will also be a central business district, 5-star hotels, an opera house, theatre, a planetarium, art gallery and a museum. Half of The Lagoons will be sold to developers. The rest will be developed by Sama Dubai, the realty arm of the government-owned Dubai Holding. TrafficNot everything is as well-planned as the publicity suggests. In the midst of all this potential, there is a severe housing shortage. Workers are squashed into tightly crowded conditions, and even high-end expatriates are being forced to move to multi-family accommodation or sub-divide residential units. Traffic congestion has become a part of the city’s daily routine. Lines of car queues, often several kilometres long, are now a common sight at key junctions and roads, especially leading to Sheikh Zayed road, the main thoroughfare, a 10-lane superhighway which stretches 55 kilometres through Dubai. Dubai has more than a million cars on its roads. Soon Dubai Metro, an ambitious light rail project due to start running in 2008, will cross the city. It is constantly being added to as more problems emerge, and by 2020 it will handle 1.85 million travellers a day. But for the moment, its construction is only adding to the chaos at street level. Apartment prices still risingOil price has surged, and more money began to flow into the Gulf. Then US interest rates fell, pulling Dubai interest rates down with them, and prices again surged. Then there were more completion delays, and woah! Prices surged again. People need to live and work in Dubai. And as a place to do business, as a trading centre, Dubai continues to exceed every expectation. Dubai is gaining traction as a place to live and work, despite the stress, heat, noise, and high prices. Staff numbers are surging at the Dubai International Financial Centre, an international financial hub regulated to global standards with its law in English. It was only founded in 2003, but now that many banks are moving in, quite a few of their highly-paid staff are buying property in Dubai as an inflation hedge against rising rents. Rental yields are at around 8%. Those who entered the market early made excellent profits. New apartment prices have risen by 247% over four years, i.e., from US$1,561/ per square. metre., to US$5,420 per sq. metre today. Profits on villas have been around double. High-end residential occupancy rates today are 98%. The mood of self-confidence is obvious from banks’ attitudes to mortgage loans, with ever more mortgage providers entering the market. However, only 25% of residential property is bought on mortgage. While Dubai prices may seem high they compare with US$13,000 per square metre in prime central London, US$11,000 in New York, and US$9,000 per sq. m. in Hong Kong. Rents are still risingRents continue to rise in line with prices. Rental yields range from 8.5% on the smallest units, to 6.5% on the largest units. Under a Rent Law introduced in 2005, which applies to all the UAE states, rent increases were capped initially at 15% by a Rent Committee. Since December 2006 rent increases have been capped at 7%. Disputes go to local Rent Disputes Committees. However, landlords are completely free to set new rents. Has Dubai overreached itself?Dubai has had enormous success in attracting investors. But has the principality overreached itself? Dubai is very attractive to wealthy people from India, Pakistan, Iran, Egypt, Iraq and Syria, given its zero tax regime. It has been an excellent forward-thinker and planner. It has taken the city-state model of Singapore to heart, and learnt well. Initiatives such as Dubai Internet City (DIC), the information and communications technology (ICT) hub, have been very successful. DIC already has over 1,000 establishments, including international ICT firms such as LexMark, General Electric (GE). Intel, and others. This makes it one of the world’s largest ‘managed clusters’ of ICT companies. Another important initiative is the Dubai International Financial Centre, which will have generous benefits and first-world regulation. Yet Dubai today is hard to live and work in. Sometimes it seems the entire population is waiting for a taxi – while all taxis are stuck in traffic. Journeys take 1-2 hours. The noise of construction is incessant, yet so severe is the skills shortage that nothing gets built or done on time. The social issues are also alarming. Dubai's population has almost doubled from 1993 to 2005. It has grown from 610,926 to 1,200,309 inhabitants. There’s a thin upper crust – about 7% – of locals, or “Emiratis.” The rest are labourers and expatriate experts. By 2020, it is projected that the population will reach four million, with a much higher proportion of settled skilled or upper-income foreigners. Will this generate tension? It seems the property boom has now reached the end of its 6 year cycle in Dubai. Investors who previously missed opportunities in real estate here because of soaring prices can now review developments of interest marketed at considerably lower prices - and closer to their completion if not completed already. All the other emirates are following Dubai and intend to allow freehold sales to foreigners. The United Arab Emirates doesn't, at present, have a federal law relating to freehold ownership. It is believed there will eventually be such a law, and all property purchased by a foreigner will be put in his/her name for life, and registered in the Lands Department. The owner will then have full rights to sell, lease or rent. Abu Dhabi and Al AinAbu Dhabi's property law came into effect in August 2005. For the first time, Abu Dhabi nationals can purchase freehold real estate. Previously even locals could not buy in Abu Dhabi, where property was on a not-for-sale, gifted-land basis. GCC nationals may now buy and sell real estate, but only within designated areas. Non-GCC foreigners, unlike in Dubai, cannot buy real estate freehold, but only 99-year land ownership and 50-year surface ownership, renewable, in specified areas. In some ways Abu Dhabi’s development pattern has mirrored Dubai’s. First there was the formation of new development companies, then a small number of initial projects which attracted headline-grabbing sell-outs, wetting the public’s appetite. Then the marketing of much larger schemes began, with attractive financing for investors. However, there are important differences. Dubai under-priced initial developments to create a market. Abu Dhabi has not needed to follow this pattern. Abu Dhabi is much richer than Dubai – it is the world’s richest city, with a per capita income of $46,185 in 2005, and sits on 10 per cent of the world's oil reserves. When offered their first-ever opportunity to buy real estate instead of paying sky-high rentals, locals have jumped at the chance. Foreign nationals can buy in several designated investment zones:
Not for expatriates is the $9 billion Danet Abu Dhabi project launched by Al Qudra Real Estate on the airport road, and the $2 billion Capital Centre. The investment response from the local population has driven the expansion. Rents in Abu Dhabi have nearly doubled, by some estimates, since the launch of the new property law. In late 2006 the Abu Dhabi Government announced a rent cap of 7% per annum. Abu Dhabi, like Dubai, faces a severe shortage of housing, Only 1,100 high-end units will hit the market in 2007. However a staggering 22,000 units will be in demand, mostly from the middle class. Ras Al Khaimah Ras Al Khaimah was the first ‘copy cat’ emirate to follow Dubai’s model by offering freehold foreign ownership, initially through its 1,300 residential unit development at Al Hamra Village. Now there is a second freehold development, on the 50 beachfront acres of the five-star resort facility The Cove. As with Dubai and Abu Dhabi, the recent formation of a development company, Ras Al Khaimah Properties (RAK Properties), seems to promise more substantial moves to attract foreign developers. RAK Properties is developing a resort community, Mina El Arab, which includes a Hilton Hotel, and also the mixed-use Julfar Towers. AjmanAjman already has 15 freehold residential apartment buildings (Al Naeemiya Towers), which are being followed by Al Khor Towers. Tameer Real Estate is also developing a US$300 million freehold residential and commercial project in Ajman, Al Ameera Village. To view current properties in this market click here | |||||||||||||||||||||
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