The residential property sector ofDubai derives its growth impetus from the traditional economic sectors such as hospitality, tourism, aviation, education and healthcare, among others. The growth and evolution of the city’s traditional sectors, also led by the inception of the Free Zones, has been the key driving force for the residential property sector. The global professionals who took up promising career opportunities needed modern homes, which were offered by the series
of developments in the city. Following the global financial slowdown, the sector faced challenges which have been systematically addressed by the Dubai Government.
With international market confidence being restored – as is evident by the overwhelming response to the Dubai Bond – the Government also announced that several projects have been cancelled or are in the process of being put on hold to rectify the supply pipeline and thus help restore market dynamics Several developments have also been handed over recently, including Shorooq by Dubai Properties, Cedre Villas in Dubai Silicon Oasis, Falcon City of Wonders-Phase I.
Alongside, banks and financial institutions have started providing mortgages for ready properties in Dubai with attractive interest rates including fixed interest rates for the first few years and high loan-to¬value ratios.
Dubai Islamic Bank has recently increased its stake in Tamweel, an Islamic Mortgage company, to 57.33% becoming the company’s largest shareholder. Such initiatives have strengthened the credit markets in Dubai and also encouraged investors and end-users by facilitating the availability of mortgages at lower interest rates. The Government has been taking initiatives to regularise the property markets by implementing new laws and regulations including setting up of owner’s associations. These are expected to boost confidence in the market. For investors to re-enter the property markets the yields will have to be attractive
The commercial real estate sector has a direct bearing on the economic performance, as well as the supply side. The demand pattern for commercial space
in Dubai varies according to location, with several communities that are located near the business nerve centres reporting good demand. There are positive reports on demand for commercial property in Emaar Square, for example, in Downtown Dubai. This is
led by businesses trying to expand their offices, by leveraging the current trends, as well as organisations looking to relocate to prestigious locations.
Vacancy rates in the Dubai commercial segment, on average, is estimated at about 25% to 30%.
However, as explained, this varies with location. Sought-after locations like Downtown Dubai, Dubai International Financial Centre and Sheikh Zayed Road have comparatively lower vacancy levels. The vacancy rates have however encouraged landlords to provide additional incentives for companies including rent¬free periods, flexible payments and additional time for fit-outs.
New government initiatives to attract companies to the Emirate are expected to absorb the additional supply. For example, in a bid to attract more foreign companies and investments, the Dubai International Financial Center (DIFC) has taken the initiative to reduce or abolish their Registrar of Companies fees and be more flexible with rules and regulations. The Government is also planning to further strengthen the trade and wholesale sector, which has been one of the main contributors to the GDP. The shift to traditional sectors is expected to strengthen market confidence and drive a positive growth environment for business entities to open offices in the Emirate.