Text: Helena Kryukova Last year, many investors were seriously worried about the preservation of their capital. AND HERE TO HELP comes THE ETERNAL OASIS OF STABILITY IN A SEA OF ECONOMIC RISKS - DUBAI. THERE ARE THE GREATEST INVESTMENT FLOWS FLOWING, AND THE REAL ESTATE remains ONE OF THE MOST RELIABLE ASSETS. ANALYSIS OF THE EVENTS OF 2015 GIVES AN OPPORTUNITY TO UNDERSTAND WHY DUBAI IS TOGETHER CALLED THE “WORLD PIG BANK NUMBER ONE”.
Who how much
Large-scale investor polls about the popularity of global real estate markets have always put Dubai on one of the leading places in the list of priority areas for the purchase of property in property and rental. A 2015 Franklin Templeton global study covered 23 countries and 11,500 investors. As a result, it became known that the purchase of real estate in the UAE is one of the three main areas of investment among global investors.
68% of respondents believe that real estate in the UAE will maintain its status of the most sought-after asset over the next 10 years, and they intend to continue to invest substantial funds in this sector.
A similar sentiment was recorded by a report from the consulting company Knight Frank, presented in mid-2015, which suggests that Dubai is still on the list of main areas for investing the most wealthy people in the world. According to these data, 40% of owners of large capital in the UAE are going to invest in real estate. On average, 35% of all packages of the largest UAE investors are placed in real estate. At the same time, 60% of these investors placed funds in real estate last year, mainly in the emirate of Dubai.
Income from investments
Experienced investors rarely make mistakes, so there must be a reason for such confidence in the reliability of the Dubai real estate sector as an asset. And the main one is the amount of profit that can be obtained not only through rental property, but also due to the growth of the capital cost of these assets. Dubai's housing investment returns are among the highest in the world.
The Global Property Guide recorded that Dubai’s gross margin on real estate investments today is up to 7.21% depending on the size of the apartment, and Knight Frank said that the average income from real estate investments in Dubai has grown by 9.9% over the last year and reached 7.42%. However, this is not the limit. The income from investments in Dubai housing can reach up to 10% when it comes to luxury real estate in luxury complexes such as Dukes and Anantara on the artificial island of The Palm Jumeirah.
The figures given are not just statistical calculations of analysts. One of the three largest developers in Dubai took an unprecedented step in 2015 and announced that it would guarantee its customers 24% of the rental income for the period of the first three years after acquiring real estate in their residential complexes. A guarantee from a developer of this level is already a serious sign of stability and confidence in the future. Dubai also has no real estate taxes and rental income, which significantly increases the attractiveness of local real estate in comparison with other housing markets in the world.
Oil quotes and the future
Falling oil prices in the world can be a real deterrent for many economies in the world. However, Dubai, in contrast to Abu Dhabi, is, firstly, quite little connected with the oil sector with regard to the basic levers of the formation of the economy, therefore, the fluctuations in oil prices predicted by experts for 2016 are unlikely to have a significant impact on the real estate sector in the emirate.
Secondly, the emirate’s government understands the temporary, cumulative nature of revenues from the oil industry; therefore, it transfers many sectors to resource-saving rails in advance and increases the share of high technology in all industries and construction.
All the most advanced developments are invariably registered in Dubai. These are, for example, 42 underwater, or, as they are also called, drifting or floating villas on The World islands, which will already become a reality in the near future.
Or the world's first office building of the Museum of the Future, which will be completely "printed" on a 3D printer. The Museum of the Future in itself is exactly what characterizes Dubai so precisely as the modern capital of innovation.
Application of innovations is the key to success in a changing world. Therefore, the future of housing construction is also in Dubai, because it was here that the first completely non-volatile residential quarter of The Sustainable City already appeared, the first residents of which moved into their homes at the end of 2015. The priority of environmentally friendly, energy-saving and energy-generating technologies is the main one in the field of housing construction in the UAE, which is already enshrined in law: all new buildings in Dubai should be environmentally friendly.
In the second half of 2016, the first 800 megawatt solar energy park will also start operating in Dubai. It will be the largest solar energy park in the world. By 2020, 7% of energy in Dubai will be generated from environmentally friendly technologies, by 2030 this number will reach 30%, and by 2050 it is planned to get 75% of energy from modern, environmentally friendly sources.
Infrastructure
Each year, the government of the UAE and Dubai invests billions of dollars in the development of the infrastructure sector, the implementation of large-scale real estate projects and the creation of an unparalleled city infrastructure. The future for the emirate is clearly defined: in 2020, the World Exhibition will be held here, which will become a catalyst for the development of the entire region for years to come. Expo 2020 will not only create hundreds of thousands of jobs (and will provide demand for housing in the near future), but will also become the largest and most effective platform for demonstrating the achievements of the UAE on the world stage.
Therefore, the authorities of the emirate intend to make every possible effort to fully realize the potential of the emirate in this regard. Such events often become turning points and determine the future of a city, and in the case of Dubai, everything that will be created for EXPO 2020 will not only become scenery, but will be used for many years.
A global study by the JLL consulting company, entitled “New World of Cities: Global City Index”, conducted in 2015, showed Dubai's uniqueness as an urban entity. Dubai has occupied such a peculiar niche in the global real estate and investment market that it was able to combine the features of both a developing and fully developed urban structure. Investments in the city’s infrastructure, according to JLL, should be at least 4-6% of the city’s GDP for the city to function successfully. And the UAE authorities are currently investing about US $ 60 billion only in the construction of roads and bridges, including both existing and planned projects, and most of them are in Dubai, such as the grandiose project to build the Dubai Canal.
Stabilization and Prospects
Despite a slight decrease in activity on the real estate market, in 2015 almost 34 thousand real estate transactions were concluded in Dubai for a total of more than US $ 50 billion. 61 transactions were made in the segment of villas on the man-made island The Palm Jumeirah from January to October. total value of US $ 255 million
Over the past two years, the total value of real estate sold in Dubai for each subsequent quarter has steadily increased, on the basis of which we can conclude about the stable and steady development of the local real estate market, said the head of the Dubai Land Department, Sultan Butti Bin Majren.
Dubai property prices for 2015 certainly fell, but the decline, firstly, was not as significant as some analysts suggested, and secondly, it was an urgent correction for the overheated real estate market. According to ValuStrat, over the year, property prices in Dubai fell by only 10.3%, not by 15-20%, but a year earlier, in 2014, rose by 56% since 2008, so stabilization of the market was urgently needed to neutralize the harmful effects of housing speculation and unjustified price increases. The decline in housing prices in Dubai has become a sign of maturity and market stabilization, the result of the focused work of regulatory authorities that have taken a number of measures to curb rising prices.
In the third quarter of 2015, the decline in price indicators completely stopped. Cluttons predicts that in connection with the lifting of sanctions from Iran, wealthy investors interested in investing in high-quality luxury housing will come to the world and local housing markets in the UAE. To the delight of many market participants, said the head of the Land Department, Bin Majren, we can soon expect a further increase in housing prices, and many investors can build on their short-term and long-term investment strategies.
Why Dubai attracts expats
Another sign of the year was the reorientation of the housing market towards greater attention of developers to the affordable real estate market. A study by HSBC The Expat Explorer, which covered 22 thousand expats in Dubai from 198 countries, showed that 25% of them can afford to buy a home, and 58% also admitted that they earn more than in their home country. With an average of 1 million UAE dirhams (US $ 270 thousand) for the Dubai real estate market, today in Dubai you can buy a studio apartment in one of the central areas such as Downtown Dubai, Dubai Marina, Business Bay from Burj Khalifa. At the same time, apartments of a smaller area traditionally bring more income, since they are in high demand. As for the average cost per square meter of housing, it still remains one of the most profitable in the world. In the third quarter of 2015, apartments in Dubai were sold at an average of US $ 3,147 per square meter, and villas at US $ 3,545 per square meter. Similar in quality housing in other world capitals is on average two to three times more expensive, experts say.
Forecasts and Reality
And finally, 2015 clearly demonstrated that life is often much more unpredictable than the most accurate forecasts, and the pessimism of many "predictors" was far from the truth. In 2015, 9397 new real estate properties were built in Dubai. Developers quickly orientated themselves in the situation and did not oversaturate the market, leaving demand at a fairly high level. From this we can conclude that housing prices in Dubai in 2016 will not decrease.
Reidin notes that only 31% of the planned volume of new housing will be commissioned in Dubai in 2016, which is approximately 7,500 properties, even less than in 2015, which means that there is no reason to worry about a glut of the market. In addition, rental prices in many areas of Dubai continue to grow, which also clearly indicates a consistently high demand - the main regulator of real estate prices. 2016 promises to be another step towards a successful future for Dubai, and Dubai is ready to generously share its success with everyone who makes the right choice in his favor.
You can obtain additional information on the acquisition and management of real estate in Dubai from IMEX Real Estate specialists by phone in Moscow +7 495 5100008, toll-free phone in the UAE 800-IMEX (800-4639) or by sending a request by e-mail [email protected].
