In the last ten years this city on the Arabian Gulf has grown out of the desert sands. Fueled almost entirely by oil exports, but is far more famous for it’s spectacular array of world leading construction innovation, from the current tallest building in the world ‘The Burj Khalifa’ to the sparkling ‘Burj Al-Arab’ the world’s only seven star hotel standing on and artificial island in the ocean. These are just a couple of the many one of a kind building projects in this city and they are all constructed on ground which has no solid rock beneath the sand for over 100ft.
The high level of luxury and the jaw-dropping architecture quickly turned the city into one of the world’s most popular tourist destinations, making the property values rise quickly in the years leading up to 2008. However the property values plummeted during the worldwide recession as tourism went into decline and banks became reluctant to lend, especially to foreign investment in holiday homes. These holiday properties make up a huge percentage of the Dubai property market and without the banks lending this area of the economy dried up. In recent years there have also been a number of controls placed which have slowed growth.
“In the last quarter of 2013 Dubai has seen a doubling in the transfer fee to four percent, mortgage caps for both expatriates and nationals and Emaar, a part state-owned developer, banning real estate agents from selling on off-plan property before completion. All of this has come into play in order to ease residential price growth in the emirate, which so far this year has been running at a rate of 18-22 percent year-on-year,”
(Knight Frank, 2013)
Now as we emerge from recession, investment has begun returning to the city and 2014 is forecast for the recovery to return Dubai to it’s former glory and become the world leader in real estate performance, with Prime Global Forecast predicting a price growth of between 10% and 15% for this coming year. However this combined with an increase in prices of 28% since the third quarter of 2012, 12% in the last six months alone, has sparked rumors of the possibility that this is the start of a property bubble. Mohamed Alabbar, chairman of Dubai’s biggest developer Emaar, stated the government will not allow “unjustifiable” rent increases to fuel a new price bubble, but there are still fears of over development in commercial and residential sectors which would increase the risk of the bubble bursting as was the case with so many developments in Europe, mainly in Spain where large development projects still stand empty and in many cases, unfinished. The government in Dubai is doing all it can to prevent the bubble from bursting once again as it did in 2008-2010 when prices in the gulf state fell by around 50%. Now that the infrastructure in the city is more diversified from tourism and oil it seems less likely that there will be repeats of this event and that property prices in this city will become more stable in years to come.