Dubai enjoys a strategic position in the Middle East and is a city of superlatives: it boasts the world’s tallest building (Burj Khalifa); the largest mall (The Dubai Mall); man-made islands and huge logistics hubs. Its population has more than tripled since 1995 as the city has pursued a strategy of reducing reliance on oil and energy to position itself as an international centre of trade and business, as well as tourism.
Dubai’s property boom and bust has been well documented. The emirate was opened up to foreign property ownership in 2006. Fuelled by cheap credit and speculation, prices more than doubled. But the market was hit hard by the credit crunch. Residential values fell by 60% between 2008 and 2011, office rents declined by 62% over the same period and almost half the construction projects in the UAE were put on hold or cancelled.
The city’s rapid rebound has surprised many, leading to talk of another bubble. With political turbulence intensifying elsewhere in the Middle East, Dubai has cemented its position as one of the few safe haven destinations in the region.
Prices have already appreciated 67% since their 2011 low, with annual growth of 52% in 2013 – by far the highest of any of our 12 cities (see chart below).
Following its extreme real estate boom and bust, there are a number of things Dubai is doing differently this time round. The government introduced cooling measures in the second half of 2013 in a bid to reduce speculation in property. These included mortgage caps and the doubling of property transfer fees from 2% to 4%, as well as a clampdown on ‘flipping’.
Dubai has won the bid to host the World Expo 2020, which is anticipated to generate 277,000 new jobs and inject US$40bn into the economy. As Dubai establishes itself as a confident world city, underlying economic growth will drive the emirate’s real estate markets going forward.
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