After a real estate market slump of around 60% following its 2008 peak and the subsequent 2009 corporate debt crisis, signs of a recovery are certainly showing in the UAE's most famous Emirate. The key highlights & drivers of 2012's growth, which are expected to continue in 2013 are:
- Population growth - about 5% from 2m to 2.1m, Dubai's highest ever.
- Limited supply of property in Dubai's prime & established areas, such as Dubai Marina, Downtown Dubai and the Greens.
- Dubai's political stability & the Arab Spring uprisings - capital flight out of many troubled Gulf and North African countries has gone into Dubai's depressed real estate market, to the tune of an estimated $10bn so far.
- Dubai's economy grew 4.1% in the 1st half of 2012, whilst equities gained 19%
- Tourism growth - Hotel guest numbers increased by 9.6% whilst passenger traffic at Dubai Airport with its new Emirates A380-only terminal is set to go above 50 million this year.
- An affordable Dhiran, which is pegged to the US Dollar
The residential market in particular is looking good, with one estimate claiming residential rents rose by 12% in 2012. 2012 is also expected to be the year in which the largest number of residential sales took place, with many of these in established areas. This time around, the government is actively regulating the property market, recently announcing that residential mortgages for expats could be capped at as low a level as 50% and that annual residential rent renewals may not be increased by more than 5% if they are already at average levels.
With market prospects looking better, construction has picked up with some developments formerly on-hold now completed, and new ones begun. 4 of the world's 6 tallest buildings completed in 2012 are in Dubai, which is now home to 20 of the world's 100 highest buildings. The office market seems to have stabilised, but supply still exceeds demand by far. Retail is strong especially in Dubai's top malls such as Dubai Mall which received 44.5m visitors in the 1st 9 months of 2012.
But no Dubai growth story would be complete without any ambitious government megaprojects. With Dubai's debts restructured and its banking system backed by Abu Dhabi, the richest city in the world, the most ambitious announcement has to be the Mohammed Bin Rashid city, which will include over 100 hotels, the largest shopping centre in the world and a $2.8bn theme park. Depending on how you look at it, this may be good news or a cause for concern given the recent crisis. It is not yet clear how these projects will be financed or when they will be completed, probably no time soon, but it's a sign that Dubai is back in business.