Dubai properties for sale and rent have fallen more in value in comparison to other areas of the UAE, and as a result, there has been an increase in demand from residents living in Sharjah to take advantage of falling values in Dubai’s commercial and residential property.

Nevertheless, commercial property in Dubai, particularly unused office space, has seen rising interest over the last six months, with tenants taking advantage of the falling rents as well as reflecting an increasing confidence in the broader macroeconomic position of the region.

In Abu Dhabi, there has been a similar decline in the overall value of properties, but at a much slower rate than the fall in Dubai. Abu Dhabi remains one of the more inflexible property sub-markets, with fewer properties available for occupancy. The low supply has meant higher rents for residential and commercial property, though still lower than they were a year ago, partially due to slightly decreased demand because of the financial crisis.

Nevertheless, a significant amount of new developments in Abu Dhabi are expected to re-start in 2010, having been put off in 2008 and 2009 because of the crisis of confidence in the property market. Once property developer and investor confidence is restored, the signs are that the overall UAE property market will return to the pre-crisis status quo.

In this economic downturn, something which has been able to maintain its stability is the real estate of the Middle East and, more precisely, Dubai. The property development sector did suffer for a while when the economy bottomed out, however the strength of real estate in Dubai is going to stay this time. Over time Dubai has become the epicenter for real estate.

Until recent years there were restrictions on the sale of Dubai properties to foreigners. However, with the lifting of this restriction a few years ago, the Dubai property market has been extremely dynamic.  There has been a lot of buying and selling of houses for sale in Dubai and growth had been exceptional in the years immediately following the lifting of the restriction. The Dubai government is actively driving diversification of its core industries and shifting its economic base to these fields such as finance, commerce and tourism.

There has been lots of speculation about property prices in Dubai, however major economic indicators have suggested that the growth rate of property should maintain steady growth. Another benefit from buying property in Dubai is 100% freehold ownership. Rental yields from Dubai residential property is presently between 8 and 10%, better than many developed cities around the world.

Dubai remains a strong real estate market. There is something to choose from for every investor, whether as a owner-occupier or owner-investor. Types of properties available range from residential apartments and signature villas, to office and commercial space, and it is a major attractor for international investors. Dubai real estate boasts amazing projects such as The Palm and The World – the world’s largest artificial island clusters, developed with villas, apartment towers and holiday resorts.

Those with property investment interests in the UAE may welcome research from HSBC which shows that property prices are rising in the emirates.
The new Property Ladder study shows that there has been a marked growth in the UAE property sector, in part spurred by a relaxation of maximum loan-to-value (LTV) rates that have allowed more people to get on the housing ladder.

“Anecdotal evidence also suggests that foreign investors seem to be back in the market and there are bulk buyers of property for investment purposes,” the report claimed.

Cash has continued to be the dominant force in UAE property sales, although mortgages are gaining ground and are becoming an important part of the market, the study goes on to state.

In March, HSBC announced that it would be relaxing its lending criteria for those looking to buy Dubai properties and elsewhere in the UAE, with the company now offering an LTV rate of up to 75 per cent on villas, 70 per cent on completed apartments and 50 per cent on off-plan property.Your browser may not support display of this image.

The recent opening of prestigious estate agency and property management firm Hamptons International in Abu Dhabi confirms the evidence of increased foreign investment interests. Recent ‘roadshows’ held by Hamptons in Abu Dhabi and Dubai attracted a number of UAE property development agencies, seeking to boost the healthiness of the region’s property market.

Speaking at the Cityscape Connect business breakfast, UAE real estate specialists including the chief executive of Dubai-based property agency Asteco, Elaine Jones and Steven Henderson, partner in legal firm Clifford Chance, concurred that the prospects for strong growth were becoming evident.

“Industry sentiment has moved into positive territory and it is equally important that Cityscape through the Connect series of events continues to provide a platform for open debate,” said Rohan Marwaha, managing director of the company.

News submitted by Iwona Szymańska, Hamptons International

Government officials in Dubai are in talks to introduce a new law that would clarify the rules on issuing residency visas to property buyers in Dubai – and it could be introduced as soon as this year…

Traditionally, there has been confusion around the promise that buying a freehold property in Dubai came with a 99-year residency visa included as part of the deal.

Although there was no law to back this up, many property companies were using it as a sales tool and it helped to seal many deals from international investors keen to nab a UAE visa as part of their property package.

Now, Government officials have said that the property companies didn’t have the right to offer the visa promise and that new laws are needed to clear up any lingering confusion.

Hamad Buamim, Director General of the Dubai Chamber of Commerce and Industry said, “We believe this has to be cleared up.

“We raised it to the Government and the Government came back and said there is a law that will come very soon and we feel it has to come.

“The law will clarify who deserves a visa in terms of their investment in the real estate,” he added.

Although there are rumours that the law will be passed this year, it may well be a long drawn out process as it has to come through a decree issued by the Government, seconded by the Ministry of Interior and then approved by the immigration authorities.

It is clearly very important to get this matter clarified as soon as possible as many people are still under the impression that purchasing a freehold property is all they need to do in order to secure a residency visa for Dubai, but that is not the case and there are no laws backing that claim up.

Hisham Abdullah Al Shirawi, Second Vice-Chairman of the Dubai Chamber said, “I do advocate the concept that we should have an official spokesman, who addresses these issues in a very clear and transparent manner,” he said.

News submitted by Dan Johnson, The Move Channel

The current global economic crisis has hit the rapid development in Dubai. In recent years, the Gulf state became a magnet for property investors attracted by the prospect of substantial returns, and has been marketed as a luxury shopping and holiday destination. Now the boom appears to be slowing down, as Government-owned developer Nakheel, one of Dubai’s largest employers, reduces its workforce by 500.

Dubai has become renowned for its high-status developments such as the artificial islands in the shape of palm-trees, one of developer Nakheels projects, but is clearly not immune to the economic slowdown. Nakheel is now delaying work on projects including a hotel on Palm Jumeirah which it is building with US tycoon Donald Trump, and two other island chains, the Waterfront and Palm Jebel Ali.

Only recently, the company marked the opening of the Atlantis hotel on Palm Jumeirah with a massive party, attended by an array of celebrities, at a reported cost of £20 million. The celebrations, accompanied by an extraordinary fireworks display, were astutely described by guest Sir Richard Branson as “the last party of the decade”.

Along with the opening of its new hotel, Nakheel has also taken delivery of the former cruise ship Queen Elizabeth 2, destined for a new life as a floating hotel. Such grand events may suggest that its past successes continue, but a spokesman admitted that it had had to make alterations to its short-term plans in response to current economic conditions.

The company blamed its decision to reduce staff on slow sales due to investors taking a long-term view rather than looking for the rapid gains seen in recent years, and described the redundancies as “a necessity dictated by operational requirements”. It is not the only developer in Dubai to reduce staffing levels, although it has made greater reductions than other companies. Many foreign workers who came to work on such projects now face having to return home, although Nakheel promised them support packages allowing for social, financial, and professional welfare.”

Since it opened up the market to foreign buyers in 2002, Dubai has become a popular destination for real estate speculators in search of rapid gains. Last year, 800,000 British tourists visited the emirate, on target to meet plans to attract 15m tourists to the city-state each year and create a “world capital for the 21st century” Sheikh Mohammed bin Rashid al-Maktoum, its ruler, has created a network of tax incentives and property concessions to prompt the world’s mega-corporations to set up shop there.

“Nakheel’s fortunes are seen as closely connected with those of the emirate and these job cuts are an indisputable sign of the times, said Chintan Mahida, property expert at Nubricks.com, the Dubai property bubble has by no means burst, but it is certainly not continuing to expand and the construction industry is having to take steps to weather the global economic storm.

Even Dubai, the seemingly invincible ‘nothing can stop me now’ emirate is feeling the effects of the credit crunch, with property prices in some of Dubai’s most prestigious developments falling by as much as 50 per cent…

Prices in the Downtown Burj Dubai area have fallen by as much as half, according to Dubai based estate agents. Because prices in the area had previously risen so high and so fast, when the slowdown happened, it affected that area, one of the most exclusive in Dubai, far more than others.

Whilst prices in the area were around £652 per square foot, they are now sitting at around £482. Downtown Burj Dubai, a mixed use urban development that includes the recently opened Dubai Mall, has some of the most expensive properties in the Emirate. The Burj Dubai Tower, due for completion next year, will put the area further onto the map.

This fall in property values has been pinned on the global crisis and current investors who have liquidated their assets in Dubai in order to get some ready cash.

Whilst short term investors are running scared and selling their properties for far lower prices, long term investors are sitting still holding onto their properties, confident that prices will rise once more.

When the Dubai market does begin to pick up again, properties in the most exclusive areas, including Downtown Burj Dubai, should improve before the rest.

Arabian Business has reported that Palm Jebel Ali’s island prices have depreciated by 40 per cent in the last two months.

To make matters worse, local Dubai mortgage providers have reduced home financing loan-to-value (LTV) to about 70 per cent down from 90 per cent last month.

Five and six bedroom villas on the island used to be valued at around £3 million. In the last couple of months however these prices depreciated to £1.5 million instead – a huge loss for current property owners.

According to HSBC Holdings, overall property prices in Dubai fell by four per cent between September and October, with the price of villas tumbling 19 per cent due to slowing demand and tighter lending conditions.

The report is the first official statistical evidence of a correction in the UAE housing market after years of rapid growth.

Lloyds TSB has stopped offering home loans to people wanting to buy apartments in the UAE due to the escalating credit crunch.

The bank, Britain’s third largest mortgage lender, said it had also dropped its loan to value ratio on villas in the UAE to 50 per cent, meaning buyers can only borrow half the value of the property.

Many other banks and mortgage lenders have reduced their loan-to-value ratios from 90 percent to 60 per cent over the last couple of months.

News submitted by Jon Moore, The Move Channel

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Many experts in Dubai predict that the health of the emirate’s economy will only be mildly affected by the ongoing international financial crisis, though a further draining of liquidity is a matter of concern.

The liquidity crunch that is playing out in the global markets is a result of crisis of confidence among banks. The collapse of large banks and financial institutions such as Bear Stearns, Lehman Brothers and AIG has shaken the confidence of banks to freely lend to each other, as everyone is guessing who is next. As a result, many banks which relied on short-term wholesale funds from other banks, are finding it difficult to raise such funds any longer, leading to a liquidity crunch.

Local banks in Dubai have experienced low levels of exposure to failing US banks while the tightening of the international credit market has made it harder for banks to obtain short-term funding to cover their obligations. As a precaution measure Central bank of the United Arab Emirates (UAE) announced on September 22 that it was making $13.6bn available to local banks to bridge any liquidity shortfalls. Anticipated tighter liquidity is already speeding up mergers. Tamweel and fellow Dubai-based mortgage lender Amlak Finance entered into $2.4 billion merger, a proactive measure to spur international growth.

Recent UAE Banking Announcement

His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has ordered a Dh70 billion transfer to the Ministry of Finance to pump liquidity into the banking sector. The new transfer brings the total emergency funds for the UAE banking sector to Dh120 billion.

Move By Nations To Overcome Credit Crunch

The UK government has announced a package of measures aimed at rescuing the banking system that makes available £400bn ($692bn) of fresh money. It will initially make extra capital available to eight of the UK’s largest banks and building societies in return for preference shares in them. The UK and the Spanish governments, along with a few others, issued plans to recapitalise major banks with public funds. Moreover, the UK government will guarantee new bank debt issuance for those banks that participate in the recapitalisation plan, thus securing banks’ short-term and medium-term funding.

The Fed and the US Treasury introduced a new facility (the CPFF) to buy three-month commercial paper in size, both from eligible financial and non-financial issuers. This is a major new step, as it not only provides banks with additional financing, but also means that the Fed will (via a SIV) lend directly to companies.

There is some rub-off effect of the global liquidity crisis on India as well, because foreign institutional investors are selling domestic equities exacerbating pressure on rupee. However, this has only a marginal impact on liquidity; there is no crisis of confidence among banks in India to lend to each other, as is being seen in global markets. To tackle the liquidity crunch in the Indian credit markets, RBI (Reserve Bank of India) announced the CRR (cash reserve ratio) cuts as these infuse the much-needed liquidity into the banking system.

UAE Property Sector Vs Credit crunch

Global economic downturn will not be having a major effect on Dubai’s property market. High demand and shortages have driven up prices at huge rate and the question is whether it will sustain for long? With an expanding economic base, ample reserves, high domestic demand and a strong programme of infrastructure and development projects drawing investment, Dubai may find itself better equipped than others to handle a crisis.

The Gulf’s oil-fuelled boom has so far protected the region from the major upheavals that have shaken the financial and property sectors in the United States and Europe.

A worsening global credit crunch will not have a major impact on Gulf oil producers as they soak in mammoth crude exports liquidity that allows their governments to more than offset funding for development projects. Despite a slide of nearly 50 per cent in oil prices over the past few weeks, the six Gulf Co-operation Council (GCC) countries are expected to net their highest ever budget surplus in 2008 while they continue to supplement funds on development, tempted by rapidly accumulating overseas funds.

Four GCC members in Opec – the UAE, Kuwait, Saudi Arabia and Qatar – netted a staggering $423 billion (Dh1, 554bn) in the first nine months of 2008; more than double what they projected in their budgets for the whole of the year.

Demand for UAE property has been rising faster than the developers can build as more expatriates arrive every year, pushing up both sale and rental prices and fuelling inflation.

UAE state news agency WAM said that a shortage of at least 28,000 housing units in Abu Dhabi this year was still pushing up rents and stoking inflation. Projects that are now being completed will supply only 20 percent of housing needs.

In its World Investment Report 2008, the United Nations said that while it predicts a downturn in the global trend for investments, with a 10% fall in FDI overall, there will actually be an increase of inward capital flow into the Gulf countries. With the region being largely unaffected by the sub-prime mortgage crisis, and with a significant number of major investment energy and construction projects in the pipeline, capital inflow will remain strong, said the report, issued on September 24.

News submitted by Lorena Rodriguez, P&O Homes

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