According to a research report by EFG-Hermes, the region’s leading full service investment bank, new real estate demand in Dubai is driven and facilitated by rapidly growing mortgage availability at low rates, linking the market closer to the level of interest rates, which are at historical lows thus encouraging demand and pushing prices to new highs.
The research further indicates that in the short-to-medium term, demand is responsible for the real estate market’s behavior. In addition, Dubai’s favorable demographics (4.7% population Compounded Annual Growth Rate (CAGR) between 1998 and 2003, and a sharp rise in residence permits), legal developments and financial deregulation have been the key drivers of the boom.
Commenting on the sustainability of real estate growth in the emirate, Mustafa Abdel-Wadood, CEO of EFG-Hermes UAE, said, “In order for this boom to continue, the market needs to maintain and strengthen the current set of favorable circumstances, including low interest rates. The continuation of the inflow of expatriates and the increasing recognition of Dubai as a tourist destination and a post-retirement refuge are also necessary to create sufficient demand to match the quantity and quality of the new developments.”
“The development of solid legal and institutional frameworks is essential to settle conflicts regarding property ownership, curb speculation and ensure smooth transactions and price behavior. Also, to curb speculation and rationalize market behavior, the development of new real estate investment vehicles such as real estate funds and Real Estate Trusts is essential,” noted Ahmed Gad CFA, the author of the report and co-ordinator for building materials, construction and real estate research at EFG-Hermes.
With a solid research offering that includes Arabic and English macro-economic, strategy, company and sector reports, EFG-Hermes’ research arm has recently extended its coverage of the UAE to include the real estate sector and telecoms, adding to its coverage of the banking sector and economics.
Abdel-Wadood added, “As the UAE investment market matures and gains depth, it is increasingly important to have independent, objective, and insightful analysis. This is where EFG-Hermes brings real value with its unique research capabilities, which we consider our core asset in delivering fundamentally-driven brokerage services and investment banking expertise to the region.”
In addition to the UAE, EFG-Hermes research covers economics in Saudi, Egypt, Kuwait and Jordan; banks in Egypt, Kuwait, Saudi and Oman; investment companies in Kuwait; cement companies in Egypt and Saudi Arabia; telecoms in Egypt, Bahrain, Qatar, Jordan; and real estate in Lebanon.
Tuesday, May 17- 2005 @ 10:28 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.