Thread: Dubai Investment Oppurtunity

I am Fady S. Zaki, I work as a Relationship Manager in one of the most prestigious Real Estate agencies in Dubai and I like to introduce you good opportunities for re-location and investment in Dubai.
fadysz@yahoo.com

ANALYSIS OF DUBAI REAL ESTATE MARKET

Q. Is Dubai’s real estate market heading for a downturn?
A. No. Property prices have appreciated between 50% to 150% in the last 3 years. However, we do not expect a downturn. What we expect to see is appreciation flattening out, i.e., you will get appreciation but at the more realistic growth levels of 10% to 15% per year.

There are about 150,000 freehold tenements/houses coming on the market in the next 4 years. This translates to about 37,500 units per year. The bulk of these properties will hit the market in 3 years.

Dubai’s population is about 1.6 million people. If we remove the labour class of about 500,000 people, we are left with a population of about 1.1 million, which is growing at about 11% compounded per year (as the Dubai Chamber of Commerce Statistics). Hence, 121,000 new people are coming to Dubai every year.


Let’s take an average family of 3 persons (again, as per Dubai Chamber of Commerce Statistics). That means we have 121,000 / 3 persons = 40,333 new families that need to be housed every year. That means we need about 40,000 new houses every year. If we have a compounded population growth rate of 11% per year, that means we need the following no. of houses every year:


Year: 2006 2007 2008 2009

No. of houses: 40,000 44,000 48,400 53,200

Supply: 37,500 37,500 37,500 37,500
of houses
--------- --------- --------- ----------
Shortfall: 2,500 6,500 10,900 15,700
in no. of houses

Therefore, there is still a slight shortage of houses.

Note, in addition to population growth, Dubai has a huge inflow of tourist traffic, which also needs to be housed. This tourist traffic needs short-term housing. With the tourist traffic, you again see that there is a shortfall in the supply of houses in the market.

Key indicators of supply glut are indicated by the rental market. In Dubai, the rental market is large and robust. In fact when a bldg of say 100 apts is put out to rent, it typically gets rented in 1 month, which is excellent by any standard.

Many people talk about Dubai’s market going south, however, I would suggest that you look at demographics and population growth statistics to understand really how the market will respond. Dubai’s market is becoming increasingly like that of the major metropolises in the world, such as London and New York, where property prices are quite stable. Appreciation may not be at the rate investors have enjoyed, but barring a force majeure event in Dubai like a terrorist attack, I do not foresee a crash.