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More on the Property Investment Market in Dubai

Jun 27, 2008
Investing in property in Dubai is the smart and obvious choice, especially following on from the passing of Law Number 7 that allows for the 'foreign freehold ownership of property' in certain designated areas in Dubai.
However, there still remains an underlying factor which may seriously reduce the allure of Dubai: the rate at which inflation continues to grow and the cost of living ever on the increase.

An example of this inconsistency in inflation rates and sheer immense expense of cost of living in Dubai is apparent when one takes a look a the cost of privately educating a child - in the UK it'll set you back upwards of GBP 46,000 annually but in Dubai you can almost double that figure which inadvertently makes it even more expensive to live in Dubai than in London! A fact which quite honestly baffles the mind.

When looked at in a positive light, inflation can be regarded as a sign that the economy in Dubai is strong enough and healthy enough to cope with price increases which may directly affect the property market, leaving many experts with the assumption that Dubai's property sector will indeed be able to withstand a further boom in price increases.

The negative spin on inflation however, is that by reducing the amount of disposable income inhabitants of Dubai have monthly, proportionately, this affects the amount people can and will be able to afford to pay for accommodation and eroding the tax free living attraction of the emirate altogether.

With so much uncertainty and acute division of view in Dubai's real estate sector, there is a definite clouding surrounding the property investment market in Dubai.

The question remains, is Dubai's real estate market on the brink of a notable rise in fortunes or is Dubai precariously on the threshold of a monumental collapse?

On the one spectrum is the viewpoint that the passing of Law Number 7 by His Highness Sheikh Mohammad Bin Rashid Al Maktoum will result in an upsurge in Dubai's property market profit margins.

On closer inspection of the desirability of Dubai's property market, one can easily determine whether or not Dubai's intrigue to international investors has faded, or not.

Dubai remains a tax free country, in which there is an overabundance of employment opportunities available to qualified international professionals.

Due to the fact that so many varying employment opportunities abound, salary packages and incentives on offer are usually very impressive, such that an expatriate can reside in Dubai and legitimately avoid having to pay the local government any personal taxes. This factor contributes to many internationals relocating to Dubai, as it remains a desirable place to live. Accordingly, this fact alone means that there is a constant demand for property in Dubai to buy and rent.

According to developers situated in Dubai, "There remains intense demand for completed property in Dubai which is why rental rate increases have been capped by the government. Previously the only way those moving to Dubai could find immediate housing solutions was to rent, and those investors with completed investment properties available for letting were increasing rents to astronomical heights which resulted in the government's intervention."

Dubai need to now develop and maintain a vigorous resale market, as those individuals that relocate to live and work in Dubai should have the ability to purchase property, or at least have the choice between renting and buying a completed home, which if implemented effectively should remove the need to cap rental rate increases thus bringing in more economic flow to the real estate market in Dubai.

As a direct result of the fact that many investors who bought off plan properties in Dubai are expected to take up residence in their completed units upon completion, there will be less demand for either rental accommodation or even resale property.

Could this then be the fuel behind the recent upsurge of developers now offering incredible incentives to those who agree to purchase unsold off plan properties?

There have been reports of some developers offering potential purchasers luxury cars and other incentives if they commit to purchasing new waves of off plan properties that can have up to a 3 year build period...is this because they are finding it hard to shift their stock, or is this because the desire to own property in Dubai has only increased in insurmountable proportions. Seems like only time will tell, but one thing is for sure: International interest Dubai has certainly NOT diminished.
About the Author
Property Select offers a comprehensive selection of overseas Property in Dubai, news, members club and reviews of the latest property developments.
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