Dubai: Pockets of real estate up

Prices in Dubai’s residential property segment have posted solid growth over the past few months, and other areas of the sector are also showing signs that recent declines are beginning to reverse. However, due to excess supply in many segments, it will be some time before demand catches up with new development.

In its first-quarter report, CBRE, an international commercial real estate firm, said the sector continues to grow and has witnessed an increase in transactions for residential properties, from 2605 in the fourth quarter of 2011 to 2745 in the first quarter of this year, for a total value of $843.93m. Prices also increased by 3% in the first three months of the year. 

Further evidence of the upward trend of Dubai’s residential property market came from real estate research firm Reidin, which issued a report in mid-May stating that prices for residential real estate in Dubai had risen by 1.53% in April and 11.46% over the 12-month period ending that month. 

While the rate of growth given by different agencies may vary to some degree, all point toward a slow but steady recovery in Dubai’s residential property market. According to CBRE, rates for commercial space have remained unchanged over the past five quarters and occupancy levels and demand have slowly been increasing, with many companies looking to relocate to updated and fitted spaces. 

The increased interest in residential properties has apparently struck a chord with a number of the emirate’s banks. New mortgage products aimed specifically at foreign clients are currently being developed, as international clients are increasingly viewing the Dubai real estate market with more confidence, according to Jean-Luc Desbois, the managing director of local realty consultancy Home Matters.

“We have now got three, maybe four, banks who are interested in financing certain people who are non-residents,” Desbois told local media on May 24.

Easier access to credit for overseas buyers could serve to further stimulate sales, both among foreigners looking for investment properties and those wanting to live in the emirate. 

Some of that investor confidence may be driven by a new law proposed by the government and put forward by the Dubai Land Department (DLD). Under the draft Investor Protection Law (IPL), which could be enacted this month, the rights of owners will be reinforced, including their ability to cancel their contracts if the developer does not provide all the facilities and services listed under the buyer’s agreement, or if property is not handed over within the designated eight-month period.

The law will also mandate that sales for a project cannot be opened until at least 20% of the development has been completed, reducing the likelihood of cancellation after deposits have been taken.

“The IPL is the first law of its kind regionally and globally,” Sultan Butti Bin Mejrin, the director-general of DLD, told Oxford Business Group. “The DLD has devoted a significant amount of time and effort collaborating with a wide range of parties in the real estate market, as well as consulting and legal firms, to produce a text that meets Dubai’s ambitions in protecting investors. The draft takes into account a number of legislative laws and regulations to ensure the optimal application of the new law.”

Though the proposed legislation will help protect investors buying into new developments, it will not be retroactive, leaving those who have invested in cancelled or delayed projects having to settle matters in the courts or through arbitration.

Despite the lack of a retroactivity clause, the new law will strengthen investors’ rights and will help instil further confidence in a sector that is already regaining momentum.

“Investors are slowly returning to the market,” Nicholas McLean, the managing director of the Middle-East region at CBRE, told Oxford Business Group. “The industry as a whole has been buoyed by an improved legal and regulatory framework and the outlook is quite favourable.”