Back during the financial crisis, if looked like Dubai might be in trouble. The city built on luxury living and Middle Eastern business travel seemed out of step with the new economic reality, and questions were being raised about its very future.
Fast forward five years, and it seems that the naysayers got it wrong. Dubai is firmly back in the saddle, with a GDP that is running at a healthy 4.4%. The real estate market in Dubai is similarly heating up, providing significant opportunities for investors.
According to Jones Lang LaSalle, a large financial and professional services firm that specializes in commercial real estate and investment management, "The Dubai real estate market continues to improve with all sectors in a recovery phase. The strongest performance in the office sector remains concentrated in the best quality projects in prime locations. The residential and retail markets are witnessing a more broad-based recovery while the hotel sector has maintained its strong growth and industrial continues to expand."
In the residential market, Q2 2013 saw strong growth, with sales of villas such as those in Jumeirah Islands rising in price by 12% year-over-year, and apartments rising by a very strong 17%. Rental prices were also up, with villas coming in at 13% growth, and apartments at 12%. However, despite the rise, prices are still 17% to 19% less than they were when the market hit its peak in 2008, indicating that there is plenty of room for them to rise further – which is good news for potential investors. To get a feel for what types of residential property are available for investment in Dubai, take a look at emiratespropertyshop.com.
If you are thinking about investing in office space in Dubai, then there is good news as well. The return to economic growth has driven a corresponding surge in the commercial market, with buildings seeing rents rise 8% on average for prime real estate. In general, growth is best for quality buildings in desirable locations, such as the Business Bay and Jebel Ali. There has also been a trend of increasing investment from China and India, further adding to the upwards pressure on the market.
Industrial units are also doing well, with the market showing greater stability and resilience than other countries in the Middle East and North Africa. With approximately 66 million square meters of space available today, primarily devoted to logistics and light industries, and further large amounts of land set aside for new industrial areas, this sector is likely to continue expanding and offering investment opportunities for the foreseeable future.
Rounding out the picture, hotel and mall space has remained relatively static, with no new mall completions and only one new hotel built in the last 12 months – although several new facilities are expected to be completedin the next year. Tourist volumes increased at an annual rate of 9% in 2012, and hotel occupancy rates were up as well. While investing in hotels in Dubai is primarily for large institutional investors, it is interesting to note that there is an increasing trend to convert office units to hotels, perhaps providing an opportunity for mid-tier investors.