There are already signs that Dubai property market is recovering while its neighboring Abu Dhabi, UAE's capital, is still struggling.
"Dubai is close to the bottom. I don't think Abu Dhabi has reached the bottom yet," said Craig Plumb of Jones Lang LaSalle UAE.
The Dubai residential property price index (RPPI)—all residential, published by Reidin.com, rose by 7.5% in January 2012 from a year earlier. In contrast, the Abu Dhabi RPPI—all residential dropped 4.1% over the same period.
However, this conceals price movements for different property types. During the past several months, prices of villas have been rising while apartment prices continue to plunge. During the year to January 2012:
Reidin’s Dubai RPPI covers seven cities, eight main districts and four major developments. On the other hand, the Abu Dhabi RPPI covers seven cities and four main districts.
Dubai’s most desirable districts like Emirates Living, Downtown Dubai, Dubai Marina and Palm Jumeirah have experienced healthy house price rises in the past several months. In contrast, house prices continue to fall in less desirable areas like International City and Dubailand.
The total value of property transactions in Dubai rose by 14% to AED142.9 billion (US$38.9 billion) in 2011, according to the Dubai Land Department. Property sales in Abu Dhabi rose by 5% to AED4.3 billion (US$1.2 billion) in 2011, according to property website Bayut.com.
In Dubai, about 23,000 new housing units are expected to enter the market in 2012, according to Jones Lang LaSalle MENA. In addition, around 24,000 dwelling units are expected to be completed in Abu Dhabi in 2012, according to property consultant Asteco.
The huge increase in supply will inevitably have an impact on property prices in 2012. In addition, the regional political unrest and the Eurozone debt crisis aren’t helping the UAE’s housing market.
Abu Dhabi house prices are predicted to fall by about 10% in 2012, while house prices in some of the most desirable places in Dubai are expected to remain stable or rise modestly this year, according to local property analysts.
To help Dubai’s housing market and boost investor confidence, the government recently announced that foreign property buyers in Dubai will be given a visa for three years instead of just six months.
"Dubai is close to the bottom. I don't think Abu Dhabi has reached the bottom yet," said Craig Plumb of Jones Lang LaSalle UAE.
The Dubai residential property price index (RPPI)—all residential, published by Reidin.com, rose by 7.5% in January 2012 from a year earlier. In contrast, the Abu Dhabi RPPI—all residential dropped 4.1% over the same period.
However, this conceals price movements for different property types. During the past several months, prices of villas have been rising while apartment prices continue to plunge. During the year to January 2012:
Reidin’s Dubai RPPI covers seven cities, eight main districts and four major developments. On the other hand, the Abu Dhabi RPPI covers seven cities and four main districts.
Dubai’s most desirable districts like Emirates Living, Downtown Dubai, Dubai Marina and Palm Jumeirah have experienced healthy house price rises in the past several months. In contrast, house prices continue to fall in less desirable areas like International City and Dubailand.
The total value of property transactions in Dubai rose by 14% to AED142.9 billion (US$38.9 billion) in 2011, according to the Dubai Land Department. Property sales in Abu Dhabi rose by 5% to AED4.3 billion (US$1.2 billion) in 2011, according to property website Bayut.com.
In Dubai, about 23,000 new housing units are expected to enter the market in 2012, according to Jones Lang LaSalle MENA. In addition, around 24,000 dwelling units are expected to be completed in Abu Dhabi in 2012, according to property consultant Asteco.
The huge increase in supply will inevitably have an impact on property prices in 2012. In addition, the regional political unrest and the Eurozone debt crisis aren’t helping the UAE’s housing market.
Abu Dhabi house prices are predicted to fall by about 10% in 2012, while house prices in some of the most desirable places in Dubai are expected to remain stable or rise modestly this year, according to local property analysts.
To help Dubai’s housing market and boost investor confidence, the government recently announced that foreign property buyers in Dubai will be given a visa for three years instead of just six months.
Analysis of United Arab Emirates Residential Property Market »
RENTAL YIELDS
Last Updated: Sep 29, 2011
Prices and rents in Dubai have both declined very significantly since our last survey in September 2009 – and even then, they had fallen significantly from 2008.
Dubai has been through a storm. The country is still a long way from recovery. Prices stopped falling some time ago, but unlike in many other post-crash countries there are as yet no real signs of revival.
Prices for apartments typically range from around US$3,700 to US$4,200, except on the very largest apartments, which are somewhat less highly priced. This compares with a range of US$6,650 to US$7,300 at the peak of the boom.
Overall, gross rental yields in Dubai are moderate at around 5.6% to 6.5%.
Yields for smaller-sized apartments have moved up, but not those for larger-sized apartments.
These yields are not impossibly low. They form the base from which a recovery could begin to take place.
Dubai has been through a storm. The country is still a long way from recovery. Prices stopped falling some time ago, but unlike in many other post-crash countries there are as yet no real signs of revival.
Prices for apartments typically range from around US$3,700 to US$4,200, except on the very largest apartments, which are somewhat less highly priced. This compares with a range of US$6,650 to US$7,300 at the peak of the boom.
Overall, gross rental yields in Dubai are moderate at around 5.6% to 6.5%.
Yields for smaller-sized apartments have moved up, but not those for larger-sized apartments.
These yields are not impossibly low. They form the base from which a recovery could begin to take place.
TAXES AND COSTS
Last Updated: Jan 25, 2012
Rental Income: There is no income tax, but that is slightly misleading, as there is a 5% tax on residential leases, assessed on the rental income.
Capital Gains: There is no capital gains taxation in Dubai.
Inheritance: The thorny issue of inheritance has caused a lot of debate. It is hoped that the position will be clearer once the new Land Law is enacted.
Residents: The Residents' visa renewal fee is AED1,360 (US$370) every three years per person.
Capital Gains: There is no capital gains taxation in Dubai.
Inheritance: The thorny issue of inheritance has caused a lot of debate. It is hoped that the position will be clearer once the new Land Law is enacted.
Residents: The Residents' visa renewal fee is AED1,360 (US$370) every three years per person.
BUYING GUIDE
Last Updated: Nov 19, 2007
Total round-trip costs are around 3%-7%. There are no property-related taxes in Dubai, which accounts for the low transaction costs. There is only the 2% registration fee and real estate agent's commission (1%-5%).
LANDLORD AND TENANT
Last Updated: Mar 04, 2009
The government introduced a rent cap of 15% in 2006, which was slashed to 7% in 2007. The rent cap was further reduced to 5% in 2008, in an effort to curb inflationary pressures.
In January 2009, Dubai’s Real Estate Regulating Agency (RERA) unveiled a new rental index to replace rent caps. Following this a new rental law was released, establishing the rental index as a benchmark for rent increases.
In January 2009, Dubai’s Real Estate Regulating Agency (RERA) unveiled a new rental index to replace rent caps. Following this a new rental law was released, establishing the rental index as a benchmark for rent increases.
NEW RENTAL LAW | |
| CURRENT RENTAL RATES | FOR 2009 |
| Equal to or 25% below the rental index | |
| 26% to 35% below the rental index | |
| 36% to 45% below the rental index | |
| 46% to 55% below the rental index | |
| More than 55% below the rental index | |
However, RERA has come under criticism because the new rent figures were much higher than current rental rates in the market. The rental index, compiled during mid-2008 (at the height of the property boom and before the fallout from the global financial crisis), gives an inflated view of rents in Dubai. The discrepancy caused uproar and confusion among tenants who were left watching their landlords hike their rents to unwarranted levels.
This prompted RERA to update the new rental index earlier than planned. The revised index is due to be released in April 2009. Those tenants who have not yet renewed their contracts are likely to hold on to their old contracts until the new index is released.
ECONOMIC GROWTH
Last Updated: Mar 20, 2012
Optimism in Dubai!
In 1971 the United Arab Emirates (pop. 5.4 million in 2011) was established as a federation of seven emirates or states. Abu Dhabi, the capital, and Dubai the economic centre, are two of the seven emirates. Economic prosperity arrived in the early 1970s, with oil price rises.
The UAE’s economy is open and dynamic, a hub of trade and enterprise. While oil remains the core, the non-oil economy has grown rapidly. The emir of Dubai is the most ambitious of the rulers. Aiming to diversify away from oil, Dubai has developed various industries, including tourism, manufacturing and real estate. It aims to be the financial centre for the entire Middle East. Initial success of the diversification plan, especially real estate, led other Gulf states to copy Dubai.
As the smallest of the seven emirates, Dubai expanded its land area through reclamation. Almost unheard of in the Middle East, Dubai began offering virtual land ownership to foreigners in its developments. The enthusiastic reception of the Palm Islands project led to bigger and more ambitious real estate projects, including the world’s tallest hotel, the tallest structure, and so on. With housing units costing millions of dollars, ownership of a unit or an island in Dubai became a new status symbol for the rich.
The real estate party abruptly ended with the global financial crisis. With a significant amount of wealth wiped out after the US subprime mortgage crisis, a lot of buyers cancelled their purchases of apartments in the still unfinished projects. The credit crunch also made it difficult for developers to secure continued funding for construction. Nearly half of all construction projects in Dubai were cancelled or postponed indefinitely as Dubai experienced one of the biggest property collapses during the global crisis.
However, house prices are now rising again. Dubai posted healthy economic growth during the past two years. Consumer confidence is rising again and homebuyers are coming back into the market.
Overall GDP growth for UAE was 4.9% in 2011, after growth of 3.2% in 2010 and a contraction of 3.15% in 2009. Real GDP growth is expected to moderate to 2.5% in 2012, according to the IMF.
From 2004 to 2008, the UAE economy expanded by an average of 7.9% per year, after an astonishing GDP growth rate of 16.4% in 2003.
The economy of Dubai is projected to expand by up to 5% in 2012. Abu Dhabi’s economy is expected to grow by 4%.
Consumer prices rose by 0.7% in January 2012 from a year earlier, according to the National Bureau of Statistics. In 2012, inflation is expected to be 2.4%.
The UAE’s economy is open and dynamic, a hub of trade and enterprise. While oil remains the core, the non-oil economy has grown rapidly. The emir of Dubai is the most ambitious of the rulers. Aiming to diversify away from oil, Dubai has developed various industries, including tourism, manufacturing and real estate. It aims to be the financial centre for the entire Middle East. Initial success of the diversification plan, especially real estate, led other Gulf states to copy Dubai.
As the smallest of the seven emirates, Dubai expanded its land area through reclamation. Almost unheard of in the Middle East, Dubai began offering virtual land ownership to foreigners in its developments. The enthusiastic reception of the Palm Islands project led to bigger and more ambitious real estate projects, including the world’s tallest hotel, the tallest structure, and so on. With housing units costing millions of dollars, ownership of a unit or an island in Dubai became a new status symbol for the rich.
The real estate party abruptly ended with the global financial crisis. With a significant amount of wealth wiped out after the US subprime mortgage crisis, a lot of buyers cancelled their purchases of apartments in the still unfinished projects. The credit crunch also made it difficult for developers to secure continued funding for construction. Nearly half of all construction projects in Dubai were cancelled or postponed indefinitely as Dubai experienced one of the biggest property collapses during the global crisis.
However, house prices are now rising again. Dubai posted healthy economic growth during the past two years. Consumer confidence is rising again and homebuyers are coming back into the market.
Overall GDP growth for UAE was 4.9% in 2011, after growth of 3.2% in 2010 and a contraction of 3.15% in 2009. Real GDP growth is expected to moderate to 2.5% in 2012, according to the IMF.
From 2004 to 2008, the UAE economy expanded by an average of 7.9% per year, after an astonishing GDP growth rate of 16.4% in 2003.
The economy of Dubai is projected to expand by up to 5% in 2012. Abu Dhabi’s economy is expected to grow by 4%.
Consumer prices rose by 0.7% in January 2012 from a year earlier, according to the National Bureau of Statistics. In 2012, inflation is expected to be 2.4%.
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