United Arab Emirates
Monday January 29, 2007Saundra Satterlee
Ski a black run in the morning, surf 10-foot waves in the afternoon and grab some quick shopping at Harvey Nichols prior to an evening?s flutter at the racetrack. Fantasy or reality, welcome to modern day ? high tech and glitzy ? downtown Dubai.
Dubai is one of seven federal United Arab Emirates (UAE). Strategically situated at the cross roads of East and West, the UAE is a country of unfathomable firsts ? including the world?s tallest tower, largest shopping mall, most expensive hotel and biggest fresh-flower terminal for blooms in global transit. Add the largest artificial archipelago on earth, shaped like a palm tree and visible from outer space. Or ?The World?, the latest cluster of man-made islands in the shape of the planet?s countries and continents. Where else would you find the largest Guggenheim Museum in the world, a Harvard Foundation for Medical Research, the Imperial College London Diabetes Centre and an ?intelligent? high rise in the form of an Apple iPod. Eclectic perhaps, but innovative, imaginative and backed with serious money.
Country and economyThe UAE was once a group of small sheikdoms on the old Silk Road with an important pearl trade. In 1820 there began a series of treaties and truces with the United Kingdom that resulted in the UK taking responsibility for the sheikhdoms? defence and external relations, which lasted until independence in 1971. Although the UAE federation now sits in the most highly volatile region of today?s geopolitical world, it is not only stable but also exceedingly rich.
The UAE has one of the fastest growing economies in the world. ?The economy saw a 2006 boom with 25% to 30% nominal growth, one third of which is based on oil,? explains Standard Chartered Bank?s Steve Brice, regional head of Middle East research. ?Overall we are seeing an increase in investment.? The UAE has vast wealth, fuelled not only by gas and oil, but a burgeoning property market, too.
Property marketThere has been dramatic property price appreciation over the last four to five years. ?From December 2005 to October 2006, prices have gone up by 20%,? says Brice. But the UAE presents a mixed picture as far as the acquisition of property by foreign nationals is concerned. Some offer freehold purchase and others leasehold. All usually restrict foreign buyers to pre-designated areas. It should be no surprise that Dubai ? awash with new capital projects ? is at the forefront of the UAE property boom.
DubaiDubai presents a landscape of skyscrapers and tower cranes. With the aim of diversifying the economy given its diminishing oil reserves ? unlike neighbouring Abu Dhabi ? real estate investment has risen 11-fold since 2000 to reach AED165bn ($44.92bn) by the third quarter of last year. According to a report by Middle East Real Estate Society, property is expected to contribute 35% per annum of GDP over the next five years.
This boom is thanks to a 2001 property decree that for the first time allowed foreign nationals to buy property on a 99-year leasehold basis. A decree the following year covered freehold acquisition.
These decrees were formally enshrined in Dubai law in March 2006 with the ?Dubai Real Property Registration Law Number 7?, which permits freehold ownership of land and property for UAE and Arabian Gulf Cooperation Council (AGCC) citizens, while allowing the same rights to non-AGCC expatriates.
A more recent change in Dubai law relates to what ? paradoxically during a construction boom ? is an under-supply of completed property coupled with soaring rents. But on January 1 a 7% rent cap came into force for 2007. ?This is an important move to stabilise the market,? says Christopher Steel, head of Arabian operations for Hamptons International, now part of Emaar Properties.
Emaar?s flagship project in Dubai is the Burj Dubai, set to be the world tallest building at 160 stories when completed in 2008, which will include everything from apartments to a Giorgio Armani Hotel.
Close to the Burj Dubai, Old Town Island?s Attareen is a seven-story waterfront project of 88 one to three bedroom apartments, restaurants, souqs and a five-star hotel drawing on Arabian architecture that will feature market squares, meandering alleyways and inner courtyards. Developed by Emaar, available through Hamptons with prices, from AED1.38m ($377,000). Completion is expected this autumn.
Damac runs special property giveaways. On offer now until February 2 is the choice of a car or a cash rebate with any Damac property. The more costly your property, the greater the rebate and the more upmarket the car.
Damac?s La Residence at the Lotus is one of four towers inspired by the lotus flower. With 58 floors on an island in the heart of Dubai?s Business Bay, one to three bedroom apartments are available from AED1.19m ($324,000).
The ?reclamation? of Nakheel?s 300 freehold ?The World? islands is scheduled for completion in 2008. Available to selected investors; only those with large pocketbooks need apply.
Abu DhabiNeighbouring Abu Dhabi is less known as an international property destination than Dubai. ?It has a much larger economy,? says Brice, ?and although Abu Dhabi does not yet have brand recognition, its prospects for future development are enormous.?
With 87% of the UAE?s land mass and close to 10% of the world?s oil reserves (and 4% of its natural gas), Abu Dhabi is the UAE?s largest and richest emirate. Given a reliance on finite carbon resources, Abu Dhabi is actively pursuing economic diversification, with property development high on the agenda.
Abu Dhabi with the UAE?s capital Abu Dhabi City is in the early stages of a construction boom. But while Dubai has seen unfettered growth, Abu Dhabi is taking a more measured approach.
In August 2005, the property market opened up to non-nationals in selected areas. Launched last April by Aldar Properties, Al Raha Beach covers 500 hectares and includes 5.2km of natural beachfront. It will provide a network of man-made marinas and waterways for 120,000 homes, alongside an array of other facilities.
A future Aldar project is an eco-friendly resort, set in a mangrove forest that will be managed by the Banyan Tree Group and will include a cluster of private villas. A further Aldar project is Yas Island, where 2,500 hectares will accommodate a polo field and a Formula One racetrack.
Another grand design, Sorouh?s flagship Sham Abu Dhabi development on Al Reem Island, will have homes and leisure facilities amid gardens and parks. At the entry of Sham will be the Gate District with its 83-story Sky Tower, the capital?s tallest building. One to four bedroom apartments to start at AED1m. Completion is scheduled for 2009 and the Shams, 2011.
For the emirates outside of Dubai and Abu Dhabi, Steve Brice suggests that: ?As far as scale is concerned, they are unlikely to draw as much interest at present as Dubai and, increasingly, Abu Dhabi.?
Notwithstanding, the tiny emirate of Umm Al Quwain announced on January 13 the massive Umm Al Quwain Marina development that will have 8,000 villas and town houses with boutique hotels and yacht facilities. Villas with three to four bedrooms from Emaar start at AED 2.04m ($555,400).
Pitfalls and practicalitiesIf you want to capitalise on Dubai?s accommodation shortage with the expectation of big and swift rental returns, think again. In addition to the government?s recent rent cap, with the expected flow of completed properties later this year and throughout 2008, market dynamics are likely to change. ?The net shortage will turn into a net surplus,? remarks Brice. Similarly, Abu Dhabi has a huge shortage of properties, even more so than Dubai. Brice continues: ?In 2006 rents rose 36.6%, but now like Dubai they have been capped at 7%.?
There appears to be little agreement on the exact number of units set for completion over the next two years in Dubai. Prior to signing on the dotted line, read the small print and check out what happens in the event of construction delays and if compensation will be offered.
Whether you purchase on a freehold or leasehold basis, be clear about what happens to your property in the event of your death.
Make sure that all planning permissions are in place and what, for instance, might be built next door. Find out about your right to redress should there be any zoning law changes.
As with any emerging market, there is no substitute for lots of homework along with good legal, financial and tax advice.
ContactsAbu Dhabi Chamber of Commerce
UAE Government Official Web Site
Abu Dhabi Tourism Authority
Standard Chartered Bank
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