After the real estate downturn sent the Dubai real estate market into a tail spin with prices dropping by 50% at the worst point, the property market appears to have finally begun to turn around. The market resurgence is caused in part by investors from the Middle East and South Asia (especially India) who are looking for a safe haven to park their money. Evidence of recovery was given a further shot in the arm by several new luxury property developments, some of which sold out in a matter of days.
Recent statistics show that the number of property transactions in the emirate jumped 50% in the first half of 2012 compared with a year earlier. Villa prices in prime parts of Dubai rose 19.9% in the first nine months of 2012, which is double the rate of growth seen in prime central London’s prices over the same period, according to property consultant Knight Frank. Overall, inflation-adjusted prices increased 14.43% in the first nine months of last year, according to Global Property Guide.
As further evidence that there is local confidence in the strength of the recovery, the ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, Dubai Holding and Emaar Properties, plan to develop “Mohammad Bin Rashid City.” Referred to by local media as “a jaw-dropping project,” the new development will include a park roughly the size of New York City’s Central Park (843 acres), a family entertainment center created by Universal Studios, and the "Mall of the World," a retail complex that can accommodate 80 million visitors a year. The complex will also include art galleries, golf facilities, more than 100 hotels, plus residential areas.
Although Dibai’s market activity is encouraging, there are also downside risks, according to a recent report by Citi Research. "We caution against early signs of exuberance, such as the re-emergence of off plan sales and the risks of excessive supply given some of the recently announced projects. Such exuberance could undermine not only the sustainability of the real estate recovery but lead to dislocations in the wider economy as well," the Citi report said. In other words, the beginning recovery could go off track.