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The Dubai Property Market

Source: Oxford Business Group

Growth continues apace in what remains a singular market

The real estate and construction markets in Dubai continue to be unique and distinct, despite the fact that new project announcements have slowed in 2007. After two years in which developers from EU, Asia and North America have shown great interest in the emirate, a surprising proportion of the developers announcing new projects in 2007 have local links.

Population and economic growth continue at elevated rates, although the economy appears to be stabilising, with GDP growth at 9.2% in 2006, down from 16.9% in 2005. The International Monetary Fund reports that construction contributes a stabilised 8% of GDP.

The 2007 real estate market in Dubai is worth about $18bn, as measured by transactions in 2006. Total investment is hard to quantify because the figures change so rapidly, but it is estimated that around $158bn is currently invested in projects in the emirate.

In light of this continued growth, warnings that Dubai is facing residential, commercial and hospitality oversupply have become somewhat muted. For most ordinary families, high residential prices continue to be the most visible consequence of the lack of supply. Construction delays through shortages of building materials and skilled labour, remain an unavoidable part of the market. In 2007, for example, half of the units at Dubai Properties' Jumeirah Beach Residence suffered from these shortages.

In 2006 the Swiss company contracted to supply exterior glass to the iconic Burj Dubai went bankrupt, disrupting construction schedules. Factoring in the potential for delayed delivery, best estimates now suggest that 230,000 residential units will enter the market by 2010. A staggering number of projects are currently under development or in various stages of construction. Providing a list of these developments seems somewhat redundant due to the highly publicized nature of Dubai in general. That said, it is worth nothing that many of the most sizeable projects have yet to see infrastructure completed.

As the market shifts from the quick sprint of project launches and press conferences to the marathon task of delivery, developers increasingly have to show evidence of tangible achievements in order to attract buyers. This inevitably has a knock-on effect in terms of the speed at which developments are sold as buyers have become clearer about their standards in regard to date of delivery.

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