The booming of property market in Dubai and the Northern Emirates is expected to achieve a more sustainable balance between investors and property owners by 2010, according to a leading developer.
"Driven by Dubai's frenetic and speculative real estate market, the United Arab Emirates' property market has seen unprecedented growth in recent years, easily outpacing the rest of the Arabian Gulf states combined," said Mohammed Nimer, CEO of MAG Group Property Development.
"The construction boom in buildings is about to peak in 2009, with $3 billion worth of real estate either on the drawing board or under construction. From there, the value of the market will fall back to 2007 levels of around $1 billion as more units are delivered. That will hopefully subdue rising market prices," he added.
The MAG Group CEO says actual home owners currently account for just 30 per cent of the properties sold at launch. Real estate sales are still being dominated by short-term investors and not end users, resulting in inflated prices as units are ‘sold-on’ with a premium numerous times prior to completion.
Evidence of the UAE construction boom in property reaching a peak next year can be found in the database of Proleads, the Dubai-based research company that monitors major construction projects across the region from initial planning to completion.
The database shows more than 80 units blocks individually budgeted at up to $100 million currently under construction in Dubai and the Northern Emirates with a combined value of more than $4 billion. But the database also shows a dramatic decline in announced new or planned construction of similar buildings throughout next year and 2010 as dozens of projects reach completion, he said.
"Most projects are still under construction and the next wave of supply will be coming in 2009-2010 which may help bring some stability to the market," said Nimer. "However, this may not provide major relief from rising prices as much of the problem is also due to the ever-increasing costs of land, labour and materials – something not likely to change in the short term."
MAG Group focuses on developing moderately-priced properties which appeal to owner-occupiers. "In the residential sector we emphasis on competitively priced buildings appealing to the mid-range market," said Nimer.
The Dubai real estate market has grown in 2008 with the rate of advance in prices accelerating to a level not seen since 2004, Nimer added. "Prices will continue to go up for the foreseeable future but the non-speculative case for buying real estate – to save on rent and protect capital against inflation – is becoming stronger," he said.
The MAG Group currently has seven property projects across Dubai worth Dh3 billion and is expected to grow its portfolio to Dh5 billion over the next two years. – TradeArabia News Service