Dubai Real Estate: In the Age of Maturing?

Over the past few years since the property bubble led by the collapse of the global economy, the real estate scene in Dubai has recovered gradually, and has seen quite a number of regulations stamped over to control and prevent any more bad experiences from years ago.

In effect, the increases in regulations have increased the amount of stability in the market. And right now, the skyrocketing growth of the real estate sector has eventually descended—attributed to what experts call a maturing market.

Typically there are many definitions of what may defined as a mature market, but a few key identifiers could be described as follows:

• A market is mature when prices have reached a state of normalcy.
• When movement in customers’ needs and desires do not appear to be evolving rapidly.
• Consolidation by leading competitors reducing competition.
• Market shares of leading competitors being solidified and changing gradually, if at all.
• Regulatory frameworks, legal protections and regulations aimed at protecting consumers and businesses are in place and implemented.
•  Steady regular profits and growth for the developers

Another indicator of maturation that is quite unique to the real estate market is the limited amount of land available for purchase and that the demand for this space is ever growing, as the populations increase and demands on a city grow.

Whether or not the market is emerging or maturing, it is usually seen as safe and profitable to invest in some classes of real estate. However, mature markets tend to be less risky; thus, mature markets attract the most investment, particularly from institutions who are seeking a relatively low risk investment with very favourable returns over the long term.

The United Arab Emirates has only recently been classed as an emerging market by the MSCI. This means it has a long way to go before it’s on par with more developed countries and cities. That’s why we asked Andrew Chambers, CEO of GGICO Properties and long time real estate veteran: “What would be the signs the market is maturing?”

1. Increased regulations aimed at reducing short-term speculation and flipping
2.  More Negotiations
3. Less Risky Financial Leverage
4.  Stabilizing Market Prices
5.  Brokerage Market
6.  Affordability
7.  Clearance From Bank Books of Toxic/Problem Stocks

Certainly, real estate in Dubai is very much recognized, not only in the region, but also in the worldwide scene. Right now, it is currently on the way to becoming a mature market, having survived turbulent times while still having that robust and very positive market position.

Retail sector in Dubai rides on Improving Tourism Sector

Dubai has continued to be a prime destination worldwide, with the travel and tourism sector growing, contributing 8.4% of the UAE’s GDP. It is expected to grow by 5.1% this year.

Travel and Tourism sector generated 307,000 jobs, and a job growth of 5.4% is forecast for 2015. This ideal performance has clearly had a positive effect on the retail sector.

Tourists are especially drawn to the many malls and high-end luxury brands that exist in the emirate. As a result, Dubai maintains its high rank in the world of retail. CBRE’s global market research report “How Global is the Business of Retail?” 2015 edition shows that Dubai retained its position as the second most important international shopping destination globally for the fourth consecutive year, behind London. This has caused investors in the real estate sector to develop new mixed-use infrastructures and mall expansions that highlight the city’s retail real estate space.

Dubai has a presence of 55.7% of international retailers, only less than 3% behind London (58%). Last year, Dubai attracted 45 new international brands with high-profile retailers including Hollister, Cavalli Caffe and McQ Alexander McQueen opening outlets in the emirate.

The growth in Dubai’s retail sector is linked to the increase in consumer confidence and growing retail supply, a product of the economy’s outstanding recovery, along with government support to boost tourism.

According to Emaar Malls, the Dubai Mall welcomed almost 80 million visitors last year, up almost 7% from 75 million visitors in 2013, making it a major retail destination for international tourists. Around 60% of The Dubai Mall visitors last year were UAE residents and other GCC tourists, while the other 40% were tourists from outside the region.

Chinese tourists were the biggest draws for Dubai’s hospitality market in 2014, with a 25 percent year-on-year growth in Chinese tourists.

The UAE government recognises the tremendous potential the retail and tourism industries hold for the economic growth. In line with Dubai’s tourism vision for 2020, significant steps have been taken to achieve the target of attracting 20 million annual visitors by 2020. In 2013, the UAE government announced to grant on arrival visas to 13 additional nationalities from the European Union. Measures such as these have positively impacted the tourism sector and enabled the emirate to attract more business and leisure travellers, boosting the retail sector and further strengthening Dubai’s competitive advantage in the global arena.

Dubai remains the clear destination of choice for the majority of brands looking to enter the region for the first time, frequently using the emirate as a stepping stone to wider regional expansion programmes in the GCC. 2015 is expected to be more testing for the tourism sector in view of the falling oil prices and economical and political uncertainty in some countries. Dubai, however, has strongly positioned itself as the premier tourist and leisure destination in the Middle East making it relatively resilient to market fluctuations.

In addition, new malls—Nakheel Mall and The Pointe on the Palm Jumeirah—are currently under construction. There are key projects to be developed in the coming decade, mainly Dubai Creek Harbour and Mall of the World. The malls envisioned there will be larger than Dubai Mall, which will potentially change the emirate’s retail landscape drastically.

With plenty to do, excellent infrastructure and world-class shopping and hotel facilities, tourism-driven retail growth in the emirate is set to continue.

SOURCE: Roots Land Real Estate