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Investment Ratings Actions

United Arab Emirates upgrade: from negative to neutral

Last Updated: Feb 09, 2013


Old rating: (negative)

New rating: (neutral)

The Global Property Guide is upgrading its rating on UAE residential property from negative (2 stars) to neutral (3 stars).

The price index for all residential properties in Dubai surged by 14.43% during the year to end-Q3 2012, as compared to a meagre year-on-year increase of 0.96% seen in the same period last year.

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.

So the general trend is up.

Yields in Dubai are moderate, at about 7%
Yields in Dubai are not spectacular. But they are enough to support a recovery, and in the long run (5-10 years) Dubai remains very attractive to businessmen and investors, because of its location on the long-haul air route between Asia and Europe, and proximity to Iran, Iraq, India, and Pakistan. It is also a regional safe haven, relatively politically stable.

The Gulf is growing rapidly, due to the soaring demand and constrained supply has driven up the price of oil. True, a weakening global economy could reverse this trend, but to date oil prices have held up well.

Villas are rising in price; apartments will follow more slowly.
Dubaiís 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. Abu Dhabi prices have been softer than in Dubai.

In both locations, villas have risen significantly in price, apartments have so far continued to fall in price or risen less. There is still a significant overhang of apartments.

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