Source : The Times
The wise man built his house upon the rock, the foolish man built his upon the sand, according to the parable. The Emiratis, however, have built some of the largest and most sophisticated properties in the world in what as recently as 50 years ago was desert. But is it a wise or foolish man who invests in these houses now?
The developer of The 118 in Downtown Dubai, billed as “Dubai’s most luxurious and expensive resi-skyscraper”, believes that it is a wise choice. It is staging an exhibition for rich international investors at the Four Seasons Hotel in Mayfair, central London, on May 9. So confident is it of success that Signature Developers is selling the apartments finished, through Wetherells, the estate agency, rather than off-plan, which is more usual. Prices range from £4.55 million to £11.875 million.
Meanwhile, Knight Frank is marketing the Royal Atlantis Residences, a 43-storey development on the crescent of the Palm not far from the Royal Atlantis hotel, as “Dubai’s first super-prime branded residences”. Buyers of the 231 apartments (priced from £1.4 million) due to be completed by the end of next year, will have access to all the hotel’s facilities.
Residences in the Royal Atlantis, on the Palm in Dubai, start at £1.4 million through Knight Frank
They are not the only ones with confidence in the country’s property market. Anyone who travels to Dubai international airport will be struck by the large billboards advertising one development after another. Emaar Properties, one of the largest developers in the United Arab Emirates, is most dominant, promoting a number of properties off-plan in multiple developments in Creek Harbour, Dubai Harbour, Dubai Hills Estate and the marina.
It is enough for those who remember the financial crash of 2008 — when Dubai’s building boom imploded and expatriates fled the emirate, leaving car parks full of luxury motors — to fear another bust.
However, Richard Bradstock, the head of the Middle East at IP Global, a property investment company, says: “Dubai works on shorter property cycles than New York or London because it is a developing market. Yes, there are a huge number of cranes and vacant apartments and villas, but there are locations where you will do very well. For instance, the Palm and the marina. If you are careful and do your research, buying in the right location and right building, there are opportunities for income for investors.”
Liam Bailey, the global head of research at Knight Frank, which recently published a report on Dubai’s property market, says: “Dubai’s market has been more volatile than other global cities over the past two decades, the cycles in prices — up and down — have been more extreme. There is a simple reason for this: the rate of growth of the emirate. With 76 per cent population growth over the past decade, the new-build market is a much more significant element of the overall sales market [close to 30 per cent] than in markets such as New York or London [about 10 per cent]. Yet as each cycle plays out, Dubai’s market matures, and the stock of established homes increases.
“The volume of new-build activity in Dubai is significant, but this comes with the territory. No other leading world city has experienced anything like the speed of growth that Dubai has. It is a reflection of the pace of growth in the economy [3.3 per cent forecast GDP growth for 2018], the jobs market [finance employment has risen 220 per cent in the past decade] and population, all of which have surged in recent years.”
The emirate is working towards ensuring that the economy is more resilient by encouraging diversity; it has tended to rely on tourism and real estate too heavily. Now it is building a reputation as the centre of professional services, finance and technology in the Middle East. This week the international financial consultancy DeVere Group said that its annual poll of those on its graduate programme revealed that the emirate was the first choice for those seeking a career in financial services. It was chosen by 28 per cent of graduates, ahead of Barcelona (22 per cent) and Hong Kong (17 per cent). A number of big companies have returned to the city, with others, including Facebook, Snap Inc and Amazon, setting up regional offices.
The figures don’t point to a property bubble, though, with Knight Frank’s Prime Residential Index showing a gradual slowdown in prices since 2014. Prices in key markets are variable. On the Palm property values rose by a modest 4 per cent between 2012 and 2017, and in Emirates Hills by 15 per cent, but in Downtown Dubai they fell 13 per cent. Rents are also more realistic; yields, traditionally high at 6 to 10 per cent, now tend to be a more modest 2 to 3 per cent, according to Maria Morris, a partner in the Dubai office of Knight Frank.
Dubai is very affordable compared with most of the world’s cities. While $1 million (£717,000) will buy 28 sq m of prime residential property in London, it will pay for 138 sq m in Dubai, according to Knight Frank.
Shifting sands don’t suit everyone, but there are opportunities to be had, according to Bradstock. “Prices are stabilising and could fall farther in some areas, but I think in the popular locations they are less likely to be hit hard. On the upside the exchange rate for sterling buyers is improving and is better than it has been since the Brexit vote [in June 2016]. If you want a mature stable market, Dubai probably isn’t for you, but if you don’t mind taking a bit of a risk, there could be rewards.”