Real estate in Dubai was the world's top performing in the first quarter of 2012, according to the latest Knight Frank Prime Global Cities Index. Last month, Jones Lang LaSalle also confirmed the trend, noting that residential property prices in Dubai had bottomed out, reaching prices not seen since early 2008.
According to the Knight Frank report, Dubai recorded a four percent rise between December 2011 and March 2012.
Property prices in Dubai soared after the city allowed foreign freehold ownership in 2002. The real-estate boom was the back-bone of the Dubai economy. From start-2007 to mid-2008, prices rallied almost 80 percent. The credit crunch of 2008 caused the collapse of the sector with property price decline of over 60 percent, and over US $150 billion of debt.
May 9, 2012
Analysis and Forecast: Decreasing Risk
The recent data about the Dubai real-estate sector is the best news that the emirate could expect given the current global financial situation and its own debt issues. The rise in property prices reflects an influx of regional and non-regional investors who are likely to have decided to use Dubai as a business base, as it offers a rare tax-free environment coupled with one of the most modern infrastructure in the world. Regional investors have also made use of the country’s stability as funds were invested and properties bought in Dubai, coming out of other countries in the region.
All those factors are thought to have contributed to the modest rise.
The data also is in line with predictions by Political Capital in the second quarter of 2011, predicting a rise in the property prices in Dubai.
This constitutes an overall reduction of risk for the emirate’s continued attraction of regional and non-regional investors. However, 2012 is the most challenging year Dubai faces as it needs to repay the largest amount of outstanding debt. This remains Dubai’s main challenge. Whilst major hurdles still face Dubai, recent data offers a rare piece of positive news to the Dubai economy and indicates a potentially stable long-term outlook.