6 May 2013
In spite of the global real estate price meltdown in 2008-2009, the United Arab Emirates has continued to develop into a geographically strategic location between East and West and an epicenter for international business. In the wake of the Arab Spring, Dubai is perceived as a safe haven for wealth, making it attractive for investors.
According to the recently published Forbes report entitled “The Hottest Real Estate Markets on Earth,” which ranks real estate markets in 2012 based on average house price growth, Hong Kong ranked #1 with a 23.6% price surge. Dubai ranked #2 at 19%, followed by Brazil at 13.7%, Turkey at 10.5%, Moscow at 10.2%, Austria at 10.1%, Taiwan at 9.7%, China at 9.3%, India at 8.5%, and #10 Colombia at 8.3%.
Demand for Dubai property continues to come from all corners of the world, although, according to the Knight Frank report, “… the largest segments of buyers are Indians and Pakistanis, followed by Saudi Arabians and other GCC nationals.”
The resurgence in property prices has a downside. Sound familiar? Soaring prices increasingly price prospective buyers out of the market while elevating the risk of a repeat of the 2008-2011 property bubble. Unlike 2008, investment money is coming from nearby countries because of the perceived safe haven.
Dubai’s newly-created real estate authority has been tasked with incorporating regulations to restrict speculative buyers, or property flippers. Mortgage limits, however, are not the answer since many purchases are for cash. A stiff tax on profits reaped from the quick resale of residential units, while exempting a home in which the owner has resided for a year, has been entertained to target speculators.
Projects that were cancelled, postponed, or restructured in the crash are being revived. Consulting firm Jones Lang Lasalle reports that 28,000 new residential units are coming online in Dubai in 2013.
Will the lessons learned from mistakes from the last bubble avert a repeat?
STAYING AFLOAT – Three Years in Abu Dhabi is a colorful, witty, and insightful memoir about my experiences as an American expat while living and working in the UAE.