At the turn of the century it was Dubai which became the focal point for international investment pushing the economy and the property sector to record highs. Initially, in the aftermath of the US mortgage crisis, the Dubai economy continued to push ahead and investment in property showed no signs of slacking. However, as the worldwide economic downturn continued, more investors were forced to repatriate funds to cover their liabilities and what began as a ripple within the Dubai property market soon turned into a tidal wave of sellers.
It has taken nearly a decade for the Dubai property market and the Dubai economy as a whole to recover from this experience. However, in the first quarter of 2013 GDP in Dubai grew by 4.1% and an impressive 13% of this increase has been directly attributed to the Dubai property sector. Is Dubai once again the centre of international property investment?
Is the Dubai economy changing?
In many ways the Dubai economy of today is very different to that of 2007/8 prior to the worldwide economic collapse. There is restraint in lending, the government is less proactive with regards to economic growth and there is more of a natural feel to the economy and the property market. Despite the doom and gloom of the worldwide economic downturn there has been a significant increase in trade and tourism which have benefited the real state sector significantly.
Quote from PropertyForum.com : “Dubai is to get its first residential lifestyle gated community that will include a desert botanical park with camping facilities, sand surfing, camel riding trails and rock climbing.”
It is also worth noting that various events across Dubai are attracting the attention of international visitors with nearly 4.7 million tourists flocking to the Dubai Shopping Festival alone. The fact is that Dubai seems to be back on the agenda, the emirate seems to be more stable and hopefully both businesses and the government have learned from past mistakes.
Is there a danger of the Dubai property market overheating?
When you bear in mind that there were over 400 new hotels opened in the first quarter of 2013 you could be mistaken for assuming the economy and the property sector is on the verge of overheating. This is a significant increase on the corresponding period 2012 although this time round it is very much based on supply and demand as well as the increased number of tourist to the region. A number of Dubai property developers have already suggested that they are no longer “building in hope” and instead are looking to build for demand.
While it is impossible to build hotels and other properties instantly the fact that a more secure pipeline of demand is behind the current and ongoing increase in hotel openings, as one example, shows that there is more restraint today than perhaps there ever has been. That is not to say that the property sector could not push ahead too far too quickly but perhaps there are too many old hands in the market today to let it move to levels which crippled the area back in 2008.
There is no doubt that the Dubai real estate market is central to the Dubai economy and greatly influenced by overseas investors and overseas visitors. The problem back in 2008 was that much of the property development ongoing at the time was built in “anticipation” of increased visitors who failed to materialise. Today we have many property developers across Dubai suggesting that they are only building to fulfil current and concrete demand and the days of building in hope seem to have fallen by the wayside.