Arabian sites

Designer property may have launched Dubai into global consciousness, but are investment prospects as good as they appear? Laura Henderson weighs up the evidence

Things move fast in Dubai. Part of the city known as the Old Town hasn’t even been built, yet estate agencies and developers are already marketing the area on its cutting-edge architecture and glamorous lifestyle. Over £6bn of residential development is intended for 2008. Since basic freehold ownership was granted to non-nationals in 2002, 200,000 Britons have bought here.

But while most property has been bought off-plan—freehold purchases rising 20 per cent between release and completion—things are now cooling, in favour of conventional criteria such as location. “Prices for a studio with marina view now start around £90,000,” confirms Helen Tatham of Dubai Luxury Homes, “which is more realistic than the initial under-value opening offers.”

Early teething problems are also being sorted out. Transfer fees have stopped speculators “flipping” properties  before the builders have left. The secondary market is also gathering momentum as early-bird investors upgrade and change location. “Resale property usually costs a little more,” says Zul Suriya of Homes Dubai, “but you can start renting straight away, with healthy yields of eight to 10 per cent.”

Last March, a new law granted full freehold title on land and property to overseas investors. This has released international lending and opened up the buy-to-let scene. Helen White of Dubai Select sees this as a positive step. “It’s creating opportunities for institutional investors and real-estate funds, as well as providing overseas owners with title deeds,” she says.

Choice is overwhelming. Despite free zones being limited to just 30 per cent of Dubai’s total property stock, the city’s binge-building culture is producing new developments almost daily. “The right location is pivotal,” says Tatham, “and price may be secondary to speed and demand for resale. Expat favourites such as Arabian Ranches and Dubai Marina offer a sensible long-term option, and are likely to hold their value.”

Still the undisputed premier beach location, the eight-mile Jumeirah coastal corridor remains the preserve of luxury hotels and private residences. Frontline developments such as Laguna Tower are selling well, with entry-level prices of £87,000 for a one-bed apartment. Al Sufouh, further up, is gateway to the multi-billion-pound Palm Island development—currently the world’s largest man-made atoll, extending over four miles into the sea. Its celeb-conscious profile is shaped by the likes of Michael Owen and David Beckham, who have snapped up beachfront pads. Fairmont-Palm Residence’s deluxe homes come with beach club membership and five-star childcare facilities. Three-bed townhouses with Abbey Global start at £927,000.

On the far fringes of Al Sufouh lie the foundations of tomorrow’s uptown Dubai. Currently under construction, Dubai Marina will eventually house 40,000 people, with plush hotels, townhouses and villas with a guaranteed Gulf view. Overlooking the waterfront, the six-storey Bayside Residence boasts custom-designed apartments and townhouses, a communal roof bar and a health club. Its two-bed apartments are selling for £260,000 with Key2Dubai. The neighbouring Al Majara Towers comprises 174 residential units with a private gym and Hollywood-style movie theatre; spacious three-bed apartments start at £300,000. Jane Moro, a Marina convert from West Sussex, bought her one-bed apartment in Manchester Towers in 2004: “The quality of life is fantastic,” she says. “My property has doubled in value: similar one-beds are now selling for £100,000.”

Dubai’s hallmark creation from top developer Emaar is the £428m Burj Dubai, the world’s first “superskyscraper”, combining residential and commercial space and the much-hyped Armani hotel. The district promises a “24-hour lifestyle buzz”, with 30,000 new homes, 5 million sq ft of retail space, including the world’s largest shopping mall, and landscaped gardens and lakes. Apartments in the Burj Residences range from £170,000 for a one-bed to £340,000 for a three-bed.

Dubailand, the desert-fringed, Disney-style leisure destination on the outskirts of the city, looks set to keep industry pundits in prose for years to come. G Tower dominates the resort’s flagship district, City of Arabia. Standing 280m and 45 storeys high, it has one-, two- and three-bed luxury apartments featuring Philippe Starck interiors, wrap-around balconies, and integrated home-entertainment systems. Prices start at £180,000 for a one-bed, rising to £492,000 for a three-bed.
Sports City, the jewel in the crown of this £3bn entertainment destination, is crucial to the country’s bid to host the 2020 Olympics, and will comprise over 8,000 new homes as well as modern sports facilities. “The aim is to attract health-conscious overseas buyers,” says Suriya. Tiger Woods and Kelly Holmes have reportedly put down deposits for penthouse apartments. Victory Heights—the £428m gated villa community located around the Dunes, an 18-hole championship golf course designed by Ernie Els—includes Andalusian- and Mediterranean-style villas with private pools. Prices with Dubai Luxury Homes start at £420,000.

So what does the future hold? “Dubai is now a worldwide brand,” says White, “and the investor profile is becoming even more international, riding high on strong western currencies and Dubai’s position as an affluent, crime-free destination.” Officials have confirmed that the UAE “will get a unified building code” to “maintain international best practice”. There are also plans to legally define developers’ rights and responsibilities over service of common land such as swimming pools—excellent news for new purchasers.

But while many experts expect property values to continuing rising, underpinned by high immigration, others are more cautious. They question the scale of construction and cite Jumeirah’s negative-equity Golden Mile apartments as proof of oversupply.

“Too much has been invested in Dubai for things to go wrong,” counters White, one of the experienced majority who exudes the optimism so typical of the place. Looking at Arabia’s Las Vegas-on-Sea, it’s hard not to agree.

Buying in Dubai

pros

• In 2010, the Gulf Co-operation Council (GCC) plans a monetary union, leading to a unified currency. Homeowners will benefit from an upward revaluation of their property in US dollar terms
• The economy is growing at over 10 per cent a year, with a 20-year track record of strong economic growth
• The now firmer legal footing will encourage banks to loosen their mortgage lending criteria
• There are no property, income or inheritance taxes to pay

and cons

• Dubai will be the world’s biggest construction site and traffic jam until at least 2010
• There is no conveyancing system: developers and agents currently handle contract exchanges 
• By-laws pertaining to the new freehold law have yet to be formalised, with no specific timings in place