The Emirate of Dubai
- Mar 11, 2008
The emirate of Dubai has been clocking up impressive economic growth—13 percent compounded annual growth rate recently, with a projected 11 percent per year to 2015. As part of the United Arab Emirates on the Persian Gulf, Dubai is 1,588 square miles (roughly the same size as Glacier National Park in Montana) and has a population of about 1.4 million people. An unlikely real estate market, you would think.However, Dubai punches well above its weight. Not endowed with sizeable oil reserves like its neighbors, Dubai’s growth is underpinned by the entrepreneurial spirit of its people and the business-friendly policies of its government. With warm weather year round, a location halfway between Europe and Asia, and convenient air and sea connections, Dubai appeals to international businesses and expatriates alike. Dubai’s proposition is simple: its quality of life far exceeds its cost of living. It is attractive as a tax residence and is also a major tourist hub.Some commentators see overheating in the local real estate market. This is probably a mistaken perception. Real estate prices are still below international rates. Current yield rates are around 13-14 percent. Although a new supply of land and new infrastructure are coming on stream, demand cannot be met for a few more years. This is providing robust support for prices. A big driver is growth in tourism. Every jumbo jet needs 300 back-end staffers. Every five-star hotel needs two service staff per room. Emirates has a hundred planes on order and five thousand new hotel rooms are planned. Hence, it is estimated Dubai will need 45,000 new residential units a year.Owning property in Dubai is easy. No local partner or legal entity is required.Owners of residential property are entitled to long-term residence visas. With the Dirham pegged to the U.S. dollar, downside is limited. A free float will most likely result in the Dirham appreciating against the greenback. More clarity in real estate legal framework is one area where progress needs to be made. The government recognizes this and has set up the RERA (Real Estate Regulatory Authority) to put in place the proper framework. Hirco is excited about Dubai. Currently under construction is our 90-story residential tower called 23 Marina. We also have three boutique residential projects, totaling 1.8 million square feet, under construction—one of these has already been sold. And we are entering the hospitality sector with 3,000 rooms of five-star quality planned. Dubai is a market that we feel confident about.