Since our Dubai property market update went to press in July 2011 we have been through what is traditionally the quiet time of the year for the UAE, further enhanced this year by the coming together of the traditional leave month of August and Ramadan.
Dubai may have been fairly quiet then over the last two months or so but the world however never stands still and during the regions ‘summer break’ there have been a number of economic factors at play, which in the short to medium term may well have an effect on the Dubai economy.
On the 5th August, the United States was stripped of its AAA credit rating rating by Standard and Poor’s, an unprecedented move on the world’s largest economy which had been rated as AAA by Standard and Poor’s since 1941.
August also saw significant stock market falls in the US, Middle East, Europe and Asia fuelled by the down rating of the US, combined with fears of contagion of the Eurozone sovereign debt crises to Spain and Italy as well as concerns over the downgrading of Frances’ current AAA rating.
Gold on the other hand continued to climb during August breaking through the US$ 1,750 per ounce barrier representing increases in excess of 20% so far this year.
The extent to which the above Western economic difficulties coupled with the “Arab Spring” and softening oil prices will affect the UAE and Dubai economy is yet to be seen, but in isolation however the Dubai economy is showing positive signs of improvement with economists, politicians and business leaders predicting economic growth over the coming months.
The IMF country report for the UAE predicts a GDP growth of 3.3% for 2011 rising to 3.8% next year.
The Dubai Chamber of Commerce and Industry however predicts that Dubai’s economic growth rate could accelerate to 6% next year fuelled by the trade, tourism and logistics sectors which have posted strong growth figures in 2011 and are expected to continue do so over the next three years.
The real estate sector whilst not quite as positive a story as the trade, tourism and logistics sectors, is also beginning to show signs of activity and improvement.
Residential occupancy levels are on the up for well designed and built properties in the right location.
Quality residential accommodation in the Marina, Emirates Living, Downtown, Arabian Ranches and Jumeirah for example are in high demand with the possibility of modest rental increases being just around the corner for certain product.
Demand for high quality office space in Dubai is also experiencing an increase in enquiry numbers from large space users looking to consolidate from old obsolete space spread around the city to more modern and efficient space and we expect this trend to continue.
The development market is also showing signs of coming out of hibernation with a number of developers who are holding well located and structured land banks and developments are now considering their options to develop out, and or extend existing developments.