DUBAI MARKET VIEW october 2004

A man-made island in the shape of a palm tree and big enough to be seen from outer space sounds far fetched. Ditto in one short decade to spawn a fully functioning desert metropolis. In Dubai such achievements have confounded even the most entrenched sceptics.

Dubai, one of seven states in the federation of the United Arab Emirates (UAE), is set to become a regional economic hub. No wonder. Dubai’s non-oil GDP has been growing over the last decade with annual rates from 6 per cent to over 8 per cent. Higher rates are expected for years to come according to Dubai Centre for Commerce and Industry trade statistics, especially from real estate, the construction sector and interlinked sectors such as tourism and financial services.

Real estate is thriving, both commercial and residential. “The residential market is buoyant with a huge level of investment,” says Gareth Jacob, sales director of Dubai’s largest private development company Damac. “Prices have increased 40 to 50 per cent over the last six months.” Foreigners are flocking to the market. But the purchase of property by outsiders is new.

Only UAE nationals were allowed to own property until May 2002 when the Dubai Crown Prince issued a decree that allowed foreigners to buy property freehold. Since then, major developers have completed sales of around 5,000 freehold apartments and villas for properties ranging from studio apartments worth AED278,000 to luxury villas worth over AED5m.

A residency permit is granted automatically after completion of a sale, which must be renewed every three years, but is granted for life. “When a property is sold, a residential visa (not a work visa) goes with it.” says Mr. Jacob. But he warns that this applies only to freehold properties and not leasehold. Ultimately all residential developments are expected to be freehold, but at the moment large number of developments are waiting for freehold status A government spokesman points out that a new law to addresses this issue is currently in draft form.

Nevertheless, Dubai’s booming real estate sector is open to investors worldwide. Mr. Jacob identifies three main types. First are those looking for fast growth and good capital values with the aim of selling on. Second are the long term investors who will use the property themselves, rent in their absence and hope to have a nest egg when they sell up. With lifestyle and weather as top of the agenda – and as an alternative to say Florida or Spain – there are those who buy property purely for holidays. Whatever the motivation, choice abounds.

New projects are flourishing. Following the successful completion of The Palm, Jumeirah with its 2,000 villas and 2,500 apartments, a sister island The Palm, Jebel Ali followed. Away from the numerous marine developments, inland the Arabian Ranches is a themed community of villas around a golf course and includes state of the art facilities to fulfil every horse buff’s wildest dream.

High-rise and high tech towers are springing up everywhere and at an exponential rate. Just launched in the new Dubai International Finance Centre – the Emirate’s version of Wall Street or Hong Kong’s financial district – is Damac’s Park Towers. Two identical 30-floor highrise buildings, connected by a multi-story podium will each have 230 one to three bedroom apartments.

There is no doubt that Dubai is a place of architectural innovation. Having created the world’s first seven star hotel shaped like a sail, there are many more firsts at the planning stage or under construction. The world’s tallest building Burj Dubai, to include residential units, scheduled for completion in 2007 or ‘The World’, a cluster of 300 new islands shaped to represent the continents and countries of the world, with individual islands starting from US$10m.

Dubai sets a standard that is nothing short of remarkable and in a small way has changed the English language by rendering the words “far fetched” – at least concerning anything about Dubai – as meaningless.