A short history of Dubai Property: part 6

September 16, 2007 12:30 pm


Topping the list was the Dubai-based Fortune Group’s $1.1bn commitment to building the 108-storey Burj Al Alam in the Business Bay district, with 27 floors of serviced apartments, commercial offices and the world’s highest hotel. Rising 480 metres, the Burj Al Alam is designed to resemble a dazzling crystal flower.

The City of Arabia also launched its Wadi Residences, 1,600 apartments in five-storey buildings at the heart of its city-within-a-city, plus dinosaur park and the world’s biggest shopping mall. Meanwhile Dubai-based Al Manal unveiled its $816m Crown City residential project with 8,000 apartments in 52 buildings in the Dubai Investment Park.

Emaar Properties released the last of its popular Alvorado villas at the Arabian Ranches around its golf club, and also reported rapid sales of its first offering within The Old Town Island at the Burj Dubai Downtown, The Tajer Residences comprising 252 individually designed waterfront apartments.

Aside from the $1.1bn Burj Al Alam, there were four other major project announcements at the upcoming commercial district Business Bay: Tulip announced its Peninsula Tower, while Al Attar Properties launched The Skyscraper, Tameer rolled out The Regal Tower, and leading Korean firm Bando Housing Corporation bought land for a $350m mixed use development.

New Dubai also saw some major new development projects: the $323m Taj Exotica Resort and Spa and The Grandeur Residences on The Palm Jumeirah from ETA Star; the $191m Palm Island hotels from Zabeel Investments and TUI Hotels and Resorts; and the Iris Blue, a 29-storey residential tower in Dubai Marina from Sheth Group of India.

Largest Dubai building project

Had all these diverse companies got the Dubai property market wrong? AME Info concluded, ‘Perhaps if these companies were mainly international and not Dubai-based this might be a fair conclusion.

‘But the majority are local concerns, generally run by local businessmen with a good track record, and usually self-made, not the usual candidates for throwing money away. However, one thing that is quite certain is that the Dubai Property Law has revived the launch of new development projects in Dubai.’

Then in April 2006 the Dubai Government trumped all these announcements with the $18bn The Lagoons project. At 70 million square feet The Lagoons is the largest Dubai project of the 21st century so far. It will comprise seven landscaped islands, linked by bridges, with residential buildings, shopping centres, office buildings and marinas.

Meanwhile, Colliers International published an Office Market Overview for the Gulf region which highlighted a doubling of Dubai office rentals since 2002, and the fact that 40 per cent of current tenants were tentatively looking to increase their office space. The conclusion was that the office market would remain tight until mid-2007.

However, Colliers also noted that the present 14 million square feet of office space in Dubai will more than double to 28.7 million square feet by the end of 2008, and that there is a substantial amount of new build office space in the pipeline to come after that, such as the Business Bay office towers and now additional space in The Lagoons.

Final price spike?

This correspondent had started to feel that the game was almost up for Dubai property. But in August 2006 we published a final article on the boom which predicted a final price spike in September.

We argued: ‘In terms of rental yields Dubai property offers one of the best returns available in global property at present. Dubai rents have rocketed due to a shortage of completed property, and so the return for landlords is high.

‘This factor alone ought to guarantee at least one more upward movement in prices before the inevitable correction – perhaps as new supply kicks in later on next year. In short, market forces should push house prices sharply higher to produce falling rental yields.’

In fact this final spike forecast proved spot on, and in the autumn Standard Chartered Bank unveiled its new house price index which showed that prices had indeed spiked in September.

See also:
A Short History of Dubai Property: Part 5
A Short History of Dubai Property: Part 4
A Short History of Dubai Property: Part 3
A Short History of Dubai Property: Part 2
A Short History of Dubai Property: Part 1

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A Short History of Dubai Property: Part 5

July 18, 2007 10:15 am


AME Info explained: ‘There is a large oversupply of property of certain types – mainly middle to up-market apartments – due in 2007, and this is almost certain to lower rentals and at the very least keep nominal Dubai property prices contained at present levels.

‘For somebody intending to make Dubai their long-term home then buying is down to three factors: saving on rent; using a house as a savings policy; and the pleasure of being able to do what you want with your own home, subject only to planning constraints.’

Indeed the waning investment case for Dubai property was underlined by a new house price index published in early 2006 from the Investment Boutique modeled on the UK’s well respected Halifax House Price. It showed that 2005 was a tale of two markets, with villas performing substantially better than apartments.

Villas outperform

In fact, the average price per square foot of a Dubai villa improved by 31 per cent over the 12 month period. But the the average price of apartments fell by 10 per cent in the first half of 2005, and then rebounded back in the second half, to close pretty much exactly where it started.

However, 2006 was not a bad year for Dubai real estate as it turned out. Delays in the delivery of new projects continued to push back the date of likely oversupply, and the long-awaited Dubai Property Law was finally decreed.

This meant that for the first time foreigners could register properties under own names in the Dubai Land Department. And if the latter conjures up images of Dickensian title deeds think again; this department offers the very latest in electronic land and property title registration.

As AME Info noted, ‘Previously buyers held a contract of sale from the developer which allowed transfer of ownership only through the developer, with an agreement in the contract that a full and unencumbered freehold title would be granted on the property as soon as it became available.

Indeed, the biggest practical impact may be felt in the local mortgage market rather than the re-sale market.’

Construction delays

But in the spring of 2006 the biggest factor in the local property market was a shortage of completed property and longer and longer construction delays.

As we pointed out: ‘A brief glance through the ever-thick pages of the Gulf News property sections, and there are three of them, confirms that price levels are up in 2006. If you look at apartments in The Greens or villas in The Meadows you will find that 10 per cent is about the going rate of house price inflation so far this year.

‘How can this be explained? Well we are looking at completed property, available for occupation, and not one of the many towers emerging from the ground in the Dubai Marina and Jumeirah Lake Towers district.

‘Yields on Dubai villas of 7.5 per cent compare very favorably with 2-3 per cent available in more mature markets like the UK, and are therefore attractive to investors who will drive prices higher and rental returns downwards.’

See also:
A Short History of Dubai Property: Part 4

A Short History of Dubai Property: Part 3

A Short History of Dubai Property: Part 2

A Short History of Dubai Property: Part 1

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A Short History of Dubai Property: Part 4

July 1, 2007 3:57 pm


From the vantage point of the Montgomerie Golf Club’s terrace there is a magnificent view down over the Dubai Marina and New Dubai. Even in the year 2000 this was an empty patch of desert with a recently completed 1.8km long artificial marina.

But by 2005 more than one hundred high-rise towers started to emerge in this compact area facing the famous Jumeirah Beach and across the Sheikh Zayed Road at the Jumeirah Lake Towers. A similar picture might have been drawn for many Dubai mega projects, from the Palm Jumeirah to the Dubai Festival City site or the Dubai International Financial Centre.

Everywhere the sound of pile hammers echoed against concrete and floors rose skywards at a dizzying speed. Some three floors per week appeared at the Burj Dubai, set to rise to around 170 storeys and become the tallest building in the world.

Property riches

However, in 2005, the Dubai Property column on AME Info correctly judged that the boom was not over yet. Sceptics were a lot thinner on the ground by this point of the boom. Rising prices and flipping properties had made quite a few people rich, while the sceptics found that their rental costs were now surging, leaving them poorer both in investment terms and in their monthly outgoings.

At this time Dubai share prices were also heading to giddy heights, and AME Info suggested that a share crash would be a good thing for property prices because more cash would flow into real estate. The Chairman of Damac Properties dismissed this idea as completely absurd, but it proved correct nevertheless.

However, times were changing as the Dubai freehold revolution moved into 2006. As we noted, ‘Delays on delivery are not new in Dubai, but waiting times are getting longer. The Meadows 3 and 4 came in two months late just over a year ago, now slippages of more than six months are the norm.’

But the local real estate market was changing and maturing even at this point in the boom. The move by investors away from speculating in off-plan sales was matched by a new interest in buying villas.

HSBC mortgages

By October 2005 the Dubai real estate market showed another sign of maturity when HSBC announced that it would begin offering local mortgages. At this time, AME Info published an article that is among the best-read articles of all-time on the website.

It explained: ‘The pioneer home buyers in Dubai three years ago faced a short-list of one company when arranging a mortgage; Amlak Finance was the only place to go. Since then Tamweel has been created as a local rival and several local UAE banks have entered the mortgage market, most recently the Abu Dhabi Commercial Bank.

‘HSBC has been in the market for a while but was offering finance on a very limited selection of Nakheel properties. Now this giant of international banking has rolled back the frontier a stage further with its flexible mortgages.’

New finance is good for any market, especially from a trusted global household name like HSBC. But in 2005 the first cracks emerged in the until then breathlessly optimistic outlook for Dubai business with the stock market hitting a top in June, then crashing and recovering into November, and then heading down again.

One article summed up the year-end position for Dubai property: ‘2005 was a tale of two markets: re-sale of completed property continued strongly with prices either holding steady at higher levels, or advancing 10 per cent or more in the case of villas; but off-plan sales slowed considerably and the first negative premiums emerged on certain developments, such as The Golden Mile on The Palm Jumeirah.’

That was the first sign in three years that booms do not last forever!

See also:
A Short History of Dubai Property: Part 5

A Short History of Dubai Property: Part 3

A Short History of Dubai Property: Part 2

A Short History of Dubai Property: Part 1

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A Short History of Dubai Property: Part 3

August 12, 2004 9:15 am


May 2002 will go down in the history of Dubai real estate as the month that the great freehold property revolution began. Before that month only UAE nationals could own property, and even then often on the restricted gifted-land tenure.

It was in May 2002 that the Dubai Crown Prince General Sheikh Mohammed bin Rashid Al Maktoum issued a decree allowing foreigners to buy property freehold.

In the previous year or so 99-year leases for foreign purchase had been allowed but this was not a big success. It was the adoption of freehold tenure in general and foreign ownership in particular that sparked the great real estate boom in Dubai residential property.

The release of the second phase of Emaar’s The Meadows villas saw almost a thousand people queue up to get into the ballroom at The Emirates Towers hotel. There was a fight to get through the door, and inside villas were snapped up off-plan; and all 700 villas sold in a matter of hours.

A similar sell-out occurred when The Palm, Jumeirah’s 2,000 villas went on sale in the autumn. This iconic 5km-long, palm-shaped island off the Dubai coastline became an international sensation from Day One.

From then on it became a question of how fast developers – at first just Emaar Properties and Nakheel – could roll out their projects.

Emaar added The Springs, a development of several thousand town houses, behind The Meadows; and each successive phase was quickly sold-out. Then there came The Arabian Ranches, a themed community of villas around a desert golf course.

Meanwhile, Nakheel added a second island, The Palm, Jebel Ali not much more than a year after the unveiling of the original Palm, Jumeirah. This second island included thousands of water homes – villas on stilts in the Arabian Sea arranged to spell out a poem. Nakheel also moved on land with its Jumeirah Islands project of villas clustered on a series of small islands surrounded by lakes.

Back on dry land Emaar moved to a second phase of development of its Dubai Marina, a 3.5km artificial harbour created behind the existing beach hotels. The first apartment towers here were sold on 99-year leases, a practice now discontinued in favour of freehold.

At the Dubai Marina Emaar sold and reallocated land to other developers for formidable projects. The largest is the Jumeirah Beach Residence, a complex of 43 high-rise apartment and hotel towers now under construction.

Private developers, both local and international, also bought land at the Dubai Marina for apartment towers. Damac Properties is the most prolific, and the range of high-rise projects now rising from the ground is startling. Indeed, more that 100 towers will be built in the Dubai Marina within five years, creating a city within a city.

However, not all new real estate projects are on such a heroic scale. Emaar’s The Greens is a popular development of low-rise apartments opposite the Dubai Internet City, while Nakheel has its Garden Villas near Jebel Ali.

Thus far Dubai residential real estate projects have been concentrated almost exclusively in the area increasingly known as uptown or New Dubai, which stretches from Jebel Ali Free Zone to Dubai Internet City and back into the desert behind.

The Arabian Ranches and Emaar Towers in downtown Diera are exceptions, and Nakheel’s International City project is another indication that future developments will also be outside this zone.

Indeed, the next major focus of real estate development will be the Burj Dubai in mid-town, set to be the tallest building in the world, and apartments at two of the six towers, The Residences, are already sold out. There will also be the Old Town of low to medium-rise residential properties to follow.

See also:
A Short History of Dubai Property: Part 5
A Short History of Dubai Property: Part 4

A Short History of Dubai Property: Part 2

A Short History of Dubai Property: Part 1

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A Short History of Dubai Property: Part 2

July 22, 2004 10:12 am


For most of the 1980s the Father of Dubai, the late Sheikh Rashid bin Saeed Al Maktoum was unwell and effective control of the emirate passed to his three sons. This was not a particularly easy phase of Dubai’s economic development.

In the mid-1980s the accumulated excesses of the late 1970s caught up with the emirate and there was a minor banking crisis that resulted in the merger of several banks. Oil prices were much lower in the 1980s than the 1970s and this naturally dampened economic activity.

On October 7, 1990, Dubai’s greatest leader passed away and Sheikh Maktoum bin Rashid Al Maktoum became ruler. This was the time of the First Gulf War and the Iraqi occupation of Kuwait, and a period of high oil prices.

As a regional trading hub Dubai had greatly expanded its status with the creation of the Jebel Ali Free Zone in the early 1980s, and was thus well place to capitalize on the inevitable upswing in Middle East business activity that came with high oil prices. Also, after the liberation of Kuwait, most of the supplies to reconstruct the oil field came through Jebel Ali.

Certainly the business upturn that followed the First Gulf War was enough to more than compensate for a slump in local business in 1990; and hotels, offices and other real estate projects also followed, albeit in modest scale compared to what was to come in the future.

In 1995 General Sheikh Mohammed bin Rashid Al Maktoum was appointed Crown Prince of Dubai, effectively the CEO of Dubai Inc. Speaking recently in Jordan to the World Economic Summit, His Highness reflected on his appointment, and recalled that his brother said he could take an easy or difficult path in this position, and that he consciously chose the difficult path.

For Dubai this meant an accelerated vision of economic transformation under clear and decisive leadership. Sheikh Mohammed knows exactly what he wants to achieve for Dubai and lets nothing stand in his way.

But his expansion plans are always underpinned by business planning and a focus on investment return. His speed of execution is also stunning. For example, the Dubai Internet City was conceived in late 1999 and the first buildings opened a year later.

The original success of the Jebel Ali Free Zone in making Dubai a bigger trading hub has been used as a model in the development of a cluster of free zone cities. The Dubai Internet City has been joined by the Dubai Media City, Dubai Maritime City and many others from a thriving zone for secondhand cars to the latest which is for tea trading.

The late 1990s also saw some notable new buildings in Dubai designed to put the emirate on the global map. The seven-star Burj Al Arab hotel, the tallest free-standing hotel in the world, was the most successful. But the Emirates Towers built at the same time is also the tallest commercial building in Europe and the Middle East.

Sheikh Mohammed focused on world-class buildings and facilities which would make Dubai the location of choice for the world’s biggest companies. The return on investment was not just in real estate rentals but in the wider benefits that highly paid staff would add to the GDP of the emirate.

His Highness also promoted the development of real estate through the creation of the publicly quoted Emaar Properties in 1997, today the region’s largest real estate company, and Nakheel, a Dubai Government company.

Emaar began by creating the 3.5km long Dubai Marina behind the existing Jumeirah beachfront hotels, set to be the focus of the New Dubai, a high-rise city within a city and home to more than 40,000 residents. Nakheel became synonymous with The Palm, Jumeirah, a 5km long, reclaimed island shaped like a palm tree, which soon achieved international fame.

Thus by May 2002 when freehold property rights were created in Dubai, the stage was set for a real estate boom. The economy was growing apace with a proliferation of free trade cities, and strong oil prices lifting the regional economy. Plus exciting new mega projects such as the Dubai International Financial Centre, Dubai Festival City and Dubai Metals and Commodites Centre were on the drawing board.

See also:
A Short History of Dubai Property: Part 5
A Short History of Dubai Property: Part 4

A Short History of Dubai Property: Part 3

A Short History of Dubai Property: Part 1

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A Short History of Dubai Property: Part 1

May 27, 2004 11:04 am


Dubai is a city built on free trade, openness to foreign investment and good business practice. This is nothing new.

In 1901 Sheikh Maktoum bin Hasher Al Maktoum established Dubai as a free port, abolished all tariffs and began a programme to persuade merchants from the Iranian city of Lingah to relocate to the Dubai Creek.

A natural harbour the Creek was critical to the early development of Dubai. But even by the Second World War Dubai was still a small town with a population of around 20,000.

Dubai’s real economic development began in the 1950s when the late Sheikh Rashid bin Saeed Al Maktoum dredged the Dubai Creek, significantly expanding its capacity and rapidly repaying a loan from the Emir of Kuwait. Sheikh Rashid also founded the Dubai airport and established the first hotel in Dubai in 1959.

This gave way to the first Dubai construction boom of the early 1960s which took the population to around 120,000 at the end of the decade. It included the construction of Port Rashid with a five berth container terminal for the biggest ships of the time, and was greatly hastened by the discovery and development of oil reserves in Dubai.

However, it was in the late 1970s – with the help of high oil prices and revenues – that Sheikh Rashid made his most grandiose development decisions. As early as 1972 Sheikh Rashid stunned his advisers with a decision to build a huge new port at Jebel Ali, and the initial phase of 66 berths was completed in 1983.

At the same time the construction of the massive three basin, one million ton capacity, Dubai Dry Docks project was entrusted to his younger son Sheikh Mohammed bin Rashid Al Maktoum, today Crown Prince of Dubai, which opened in 1979; and the 33-storey Dubai International Trade Centre was also built in the early 1970s.

All three of these projects were truly ‘visionary’ and widely seen as hopelessly uneconomic at the time. The $3 billion port became the Jebel Ali Free Zone, one of the world’s most successful ports and a key to the development of Dubai. The Dubai Dry Docks and Trade Centre also proved hugely successful, and contributed greatly to the commercial development of the city.

Yet to put this vision into perspective, the cost of The Palm, Jumeirah project today – an artificial island being built off the coast of Dubai – is estimated at around $2 billion.

At current prices the Jebel Ali port would cost more than $9 billion today, and was thus far more ambitious than any development project in Dubai in the present construction boom. Even the $5 billion Dubailand theme park will not match this earlier project in scale.

This is the legacy that Sheikh Rashid bequeathed his sons when he passed away in 1990, although they had already been in charge of the emirate’s affairs for some years. The next article in this series will look at progress under their rule.

See also:
A Short History of Dubai Property: Part 5
A Short History of Dubai Property: Part 4

A Short History of Dubai Property: Part 3

A Short History of Dubai Property: Part 2

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