All about Middle East, Gulf and Dubai: May 2013

After three years of house price falls, Dubai’s housing market is now recovering fast, while its neighboring Abu Dhabi, UAE's capital, is still struggling.

In Dubai, widely viewed as a regional financial and transport and logistics hub, the all-residential property price index (RPPI) surged by a record 18.89% (18.26% in real terms) during the year to November 2012, according to Reidin.com.

Apartment sales prices in Dubai increased 11.6% y-o-y to November 2012.
Villa sales prices soared by 23.7% over the same period.

Dubai will leapfrog New York in the number of international visitors by 2016 and surpass Paris a year later, according to MasterCard.

Bangkok topped the financial service organisation's Global Destination Cities Index, followed by London, Paris, Singapore and New York.

Istanbul, Dubai, Kuala Lumpur, Hong Kong and Barcelona round out the top 10.

The number of visitors to Dubai, which climbed one place from last year's list, is expected to grow 10.9 per cent this year to 9.89 million people. That would rank it alongside Istanbul and Bangkok for the strongest growth in passenger arrivals.

The Middle East ranked highly among markets expanding the fastest in air connectivity, with Istanbul in first place, Dubai in second and Abu Dhabi in 12th.

Demand is rising strongly in Dubai. Property transactions in the emirate rose by 21% to AED63 billion (US$17.15 billion) in the first half of 2012 from H2 2011, based on figures from the Dubai Land Department. Foreign property transactions rose by 36% to AED28.3 billion (US$7.7 billion) in H1 2012 from the same period last year.

In the third quarter of 2012, Dubai’s total residential stock was about 349,000 while the total residential stock in Abu Dhabi was around 202,000, according to Jones Lang LaSalle MENA. From end-2012 to 2014, about 37,000 new housing units are expected to enter the Abu Dhabi market and around 50,000 new housing units are projected to enter the Dubai market.

Rentals also reflect the strength of Dubai’s market and the relative weakness of Abu Dhabi. During the year to end-November 2012, housing rents in Dubai rose by 7.2% while they dropped by 6.2% in Abu Dhabi, according to Reidin.com.

To prevent speculations and another property bubble from emerging, the central bank recently issued circulars to banks cutting the maximum loan-to-value (LTV) ratio for Emiratis from 80% to 70% for the first property and 60% for the second unit. In addition, the LTV ratio was further cut for expatriates to 50% for the first unit and 40% for the second unit. The new rules are expected to be enforced at the start of 2013.

In 2013, demand is likely to remain suppressed in Abu Dhabi, while property prices and rents in Dubai are expected to continue rising, according to Jones Lang LaSalle MENA.

Property prices and residential rents will continue to rise in Dubai for the next three years on increasing demand and short supply, said Damac Group founder and chairman Hussain Sajwani.

The future of the property market in the emirate is very good on strong fundamentals, Sajwani said during a seminar organised by Doha Bank in Dubai recently.

“We expect the rent will keep going up in 2014, 2015 or maybe in 2016. So we have a good three years where the demand is there and supply is not,” he said.

The chairman explained that the newly-announced projects will take at least three years to come to the market. During that period, demand will continue to rise that will result in increasing rents and prices. He added that the global financial crisis crashed property prices by almost 50 per cent in Dubai.

“The crisis was very steep, severe and painful,” he said. “Naturally, from 2009 to 2011 nobody wanted to build and very few units came to the market that created a big gap in supply and demand. Rent has gone up a lot in the past 12 months,” he added.

The UAE’s property and projects market is benefiting from a growth in tourism, hospitality and trade particularly, as Dubai and Abu Dhabi are key business hubs in the region, Sajwani said.

He said the second thing that helps Dubai is that the emirate is surrounded by huge economies with problems and issues, he said. People in these countries have money and they want to park it in a safe haven, which is Dubai. Giving Saudi Arabia as an example, the Arab Spring countries, Iraq, Iran, Afghanistan, India, Pakistan and the CIS, Sajwani said that they are coming here for different reasons. Some of them running away from cold weather, taxes, political instability or other reasons.

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