August 04 - 2004

Dubai property faces a booming autumn

Even the hot Dubai property sector bows to the heat of August as it becomes harder to do deals with the owners and developers on holiday. But this autumn promises to be the hottest on record for Dubai real estate.

That the Dubai property sector has boomed this year nobody would deny. Most new developments are now sold-out, and the only way to buy is in the re-sale market by paying a premium to the original selling price.

To begin with premiums were barely more than the asking price. Lucky people who bought then! Now 10% is a low premium, while on the Palm Island and in the Meadows the price of some properties is double the original selling price.

Some of those who have not yet bought property hope that things will cool off. But all the evidence suggests to the contrary, indeed the Dubai property market may have only just started to take off. Let us consider the basics of supply and demand.

First, the supply of property is now clearly below demand. Developers can not release property fast enough and in the case of Emaar in the Emirates Hills area they have run out of land. This creates a situation where prices can only head in one direction, upwards.

It is notable that new developments are now being launched further and further from the centre of the New Dubai which is undoubtedly the area from Palm Island through Dubai Marina to the Emirates Hills. Also developments outside this area, such as the Arabian Ranches, are selling well but are not sold-out.

With supply of property an issue, what about the demand conditions? Is the demand for Dubai property likely to slow this autumn?

Far from it, local, regional and global interest in buying Dubai property is getting stronger not weaker. There will be a new wave of local buyers who have been hanging back and are now frightened of missing out. There are oil-enriched Saudi and Kuwait buyers looking to invest. And global property money in search of good value is still just discovering Dubai.

This correspondent was surprised to receive an invitation from the owner of a Brighton penthouse in whose apartment block I will be staying later this month on holiday to discuss buying a place on The Palm, Jumeirah!

The more important point to note is that property markets gather momentum and run-and-run before they run out of steam. You need only to look at the huge gap in prices between UK houses and Dubai property to see how high prices could go, and considerably higher if you choose Hong Kong as a global benchmark.

For Dubai is a safe and very prosperous city with a strong trading tradition, and its property sector was only released from restricted ownership just over two years ago, thus it will take sometime for freehold property prices to find their correct market level. It will be interesting to watch what that proves to be.