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Dubai real estate ‘holds promise for more growth’

Dubai, October 31, 2013

Dubai property prices have risen an impressive 11.9 per cent in 2013 to date, with potential for more growth in a market that remains 30 per cent below the peak levels of 2008, said an industry expert.

The ever  increasing  inflow  of  expat  workers in the city  from  all  over  the  world is a key factor in driving consistent rental rises, added Paul Preston, director and head of leading property investment company IP Global Middle East, commenting on its latest Property Barometer for Q3 2013.

This quarter, the barometer showcases only ‘bright’ categories, therefore the best investment destinations at the current time.

Dubai, which is benefiting from rising confidence across the Mena region, and Edinburgh make debut appearances in the Q3 investment ‘hot list’ alongside US destinations including Chicago, New York, Boston and Seattle, and the Australian cities of Melbourne, Sydney and Brisbane.

German cities Munich and Berlin, which were favourites in Q1, have made a comeback and Tokyo makes its second appearance of the year.

The newfound investor confidence is achieving net yields of up to 6 per cent but Preston does advise that investors should exercise caution as the 2008 property bubble could repeat itself but hopes the Central Bank’s recently announced regulations restricting the amount of cash that homebuyers can borrow will provide the framework for sustainable growth.

Looking at the US, the regional business hub of the mid-west, the ‘Windy City’ of Chicago, is moving out of stabilisation period and offers excellent potential in the short-to-medium term.

The lower price points and higher yields are looking very attractive to investors.  Home prices in the area were up 7.8 per cent in the year to July 2013, while condominium prices increased by 14 per cent in the same period. Global power city New York has long been seen as an investment safe haven and remains among the top investment destinations in the world.

The heart of the city, Manhattan has been a hot market for some time, and that is set to continue, after an inventory plunge of 31 per cent in Q2 2013. These  rising  housing  costs  have  pushed  home seekers  to  parts of Brooklyn,  Queens  and  New  Jersey having the knock-on effect of pushing up prices there too.

Boston, home to several of the world’s top universities, offers stable local economic growth.  The Massachusetts capital’s property market only lost 18 per cent during the recession, which is considerably less than most other cities.

Home prices are up by 6.2 per cent, and this trend is only likely to continue as supply dropped a significant 20 per cent between July 2012 and 2013.  The  Seattle  property  market  has  seen double-digit  growth  for  five  months  as  of July.

Due to large employers like Boeing, Starbucks, Amazon and Microsoft supporting job creation, rental demand has also pushed prices 6 per cent higher than 12 months ago. For-sale home inventory is 23 per cent down on last year’s June level and this restriction on supply will support continued price growth.

In Europe, Edinburgh is looking very strong with a 50 per cent rise in transactions, following the lead of the London upturn.  Forecasters are expecting this trend to continue and estimate a 23.8 per cent increase in prices by 2017.

Also in Europe, Germany topped the charts in Q1 2013, with Munich and Berlin showing the most promising returns. In Q3 2013, the Munich real estate market continues to be one of the standout cities of continental Europe as prices per square metre in Munich are still significantly below other major European cities.

Berlin also stands out for its cultural and commercial opportunities and is growing at a rapid rate, but housing remains relatively cheap, with only 27.4 per cent of income typically spent on rent. Germany does enjoy a reputation as renter’s paradise but investors are now reflecting on the Bundesbank’s recent warning that properties in German cities "may currently be overvalued by between 5 per cent and 10 per cent."

IP Global reported a bi-polar Australian economy in Q2 with only Western Australia and Queensland thriving due to the mining boom. By Q3, Australia is faring better with Melbourne, Sydney and Brisbane have been highlighted as hot spots for Q3 2013.

Moving to the far east of the globe, another affordable destination is Tokyo, with the Yen weakening, prices are still less than half of their peak levels, making it a more affordable option to comparable Asian powerhouses such as Hong Kong or Singapore. – TradeArabia News Service




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