Some people are asking me what are the prospects of the real estate market in the Middle East. I had not put much thought into that; I wanted to do a bit of research of my own, read some market reports and so on before I make my comments. Lets take... Dubai for instance.
Some years back, Dubai had experienced some massive development and economic growths. It was until a few years ago, that the world markets somehow collapsed, and Dubai - suffered quite badly - especially their own property market. Dubai was seen as the gateway between Europe and Asia; and they did very well to attract some of the largest firms to set up regional offices and so on there. The construction in Dubai had boomed tremendously...
Today, 2 years after that little decline, and based on what I read - I believe that the Dubai real estate market is recovering, but not all sectors though. In the residential sector, it looks like the sale prices as well as rental rates continue to go down and decline further. As the expats are still leaving the country and an oversupply situation, developers would be struggling to sell/rent out the completed units.
Another sector that will see some major declines is the commercial property markets, in particular, the office markets. There are over 6 million sq ft of new office space to be completed in 2011 itself, in addition to the current 60 million sq ft in existence already. Many of the office projects which had stalled previously, had to continue and most are expected to be completed and handed over and introduced to the office markets in the next 2 years. I would still think that office developments in Dubai will still be a no-no; perhaps, what Dubai should do is what DBKL did last time - a freeze on all office spaces in order to curb this decline and oversupply situation. =)
On the other hand, the hotel and serviced apartment markets - i.e. the hospitality sector continues to perform very well. Their hotel occupancy rates have rise to above 80%, and the ADR rates have improved tremendously too. Tourist arrivals continue to improve as a weakened US dollar means it is cheaper and more affordable to go holiday in Dubai.
On the retail sector - shopping malls have enjoyed some good performances. Like I mentioned above, as there's an increase in tourist arrivals, the shopping malls would also enjoy the upside of performances. As per the statistics, there will be no new shopping mall - or rather, no major ones to be introduced into the market, not at least for the next 3 years. The market would then cool down a bit from its potential oversupply situation - which would mean the retail markets would do very well in the next 2 years.
In general, I would think that Dubai's overall property market should bottom out by early or mid-2012, and the turnaround should come up soon. Government policies continue to remain a strong factor in the property markets - and I believe the Dubai government would introduce new measures in order to 'cool down' the market further for it to pick up later. =)
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