Dubai property sector ‘boosted by Arab Spring’
Dubai, September 26, 2011
Dubai's hotel, retail and residential real estate sectors are enjoying a boost from the emirate's "safe haven" status amid unrest elsewhere in the Arab world, a report said on Monday.
The Arab Spring, which has resulted in the downfall of leaders in Tunisia, Egypt and Libya, has confirmed Dubai's position in the region, property consultancy Jones Lang LaSalle said.
"This stimulus has helped push the hotel and retail sectors into the recovery stage of their market cycle over the past six months, while selected sectors of the residential market are now recovering," the report said, adding that the office sector had seen the least benefit.
Dubai's property sector was hit hard by the global financial crisis, with residential prices plummeting as much as 60 per cent while billions of dollars worth of projects were put on hold or cancelled.
Jones Lang LaSalle said that although residential rents and prices are not increasing across the board, some areas are approaching stability.
"Interest from those displaced by the Arab Spring or looking for safe-haven residential properties in Dubai is reported to be particularly strong for upmarket villas in iconic projects such as Palm Jumeirah," it said.
Recovery in demand however could be delayed by slowing growth in the United States and Europe and further supply increases.
Jones Lang LaSalle said a further 5,000 homes expected by the end of 2011 and as many as 27,000 next year could exaggerate oversupply and delay a price recovery.
An increase in villa prices seen in some areas in the emirate is unlikely to spill over into the broader residential market in 2011 and the chance of any recovery in 2012 will depend on the rate of economic growth and end-user demand for Dubai residential property.
Prices continue to see further declines in many parts of Dubai, it added.
For office space, caution among occupiers will have a negative impact, but demand should increase over coming months if economic turmoil does not turn into a double-dip recession, the report said, adding that some firms had already started to increase headcount.
Office vacancy rates remained unchanged in the third quarter at 44 per cent on a city-wide average basis, it said.
More than 1.3 million sq m of office space is under construction and could be delivered by the end of 2013, adding to a total stock of around 5.9 million sq m by year end, it added.
Tenant-favourable conditions in Dubai's retail sector -- such as shorter leases and rent-free periods -- are likely to continue for the remainder of 2011, the report said.
Dubai, famed for its lavish hotels, is expected to see rising tourist numbers in the short term after a 10 per cent rise in 2010, it said.
"During 2011, Dubai has experienced heavy visitation in the wake of the socio-political uncertainties that has made such destinations as Egypt and Lebanon less attractive."
Hotel occupancy rates have begun to increase after remaining relatively stable at 71 per cent on average during 2010, it added. – Reuters