Dubai’s real estate market revival, which recently saw queues of buyers lining up at the launch of high profile new off-plan developments, is being driven by ‘refugee capital’ from buyers in countries such as Iran, Pakistan and Egypt, according to a new report.
The emirate, which was one of the worst hit real estate markets during the downturn, recently witnessed queues of buyers snapping up new projects by some of Dubai’s best known master developers.
Indebted government developer Nakheel, which reported that net profit for the first nine months of 2012 had nearly doubled to AED1.1bn (US$299.5m), sold almost AED1bn worth of property when it launched its latest project on Palm Jumeirah earlier this month.
At the same time, Emaar Properties sold out all its units in one day when it launched its latest project in Downtown Dubai in September.
Investment firm Citigroup’s latest ‘MENA Construction Projects Tracker’ report described this upsurge in demand as “something of a mini-revival”.
“We believe this has been driven by ‘refugee capital’ from buyers facing geo-political risk and currency depreciation in their domestic markets, e.g. India, Iran, Pakistan and Egypt,” the report said.
However, the report warned that this revival may be short-lived and focused on specific buildings rather than large-scale projects.
This was backed up by data on Sunday by the Dubai Land Department, which found that the total value of property transactions in Dubai reached more than AED83bn ($22.6bn) in the first nine months of 2012 but was focused on some key areas.
Emaar Properties’ Burj Khalifa, the world's tallest building, topped the list of most traded areas in terms of units with 3,305 sale transactions. In the land mortgage transactions, Al Barsha South First was the most traded area with 203 transactions while the Burj Khalifa saw 442 apartment mortgage transactions.
The Citigroup report was also cautious of the fact that while the number of projects awarded in the first nine months of 2012 was up 83 percent year-on-year. It claimed this increase was driven by a few Abu Dhabi mega project awards, such as US$6bn worth of petrochemical projects, a US$3bn nuclear power project and a US$2bn infrastructure project.
In terms of cancelled and delayed projects in the region, this rose 2 percent to around US$1.5trn, with the UAE accounting for US$757bn, or over 50 percent of all projects still canned or in limbo.