Dubai has long been associated with luxury developments and extravagant architecture, but the emirate’s property market continues to grow and mature – and it’s a change that is welcomed by Nakheel.
One of the world’s largest developers, the company behind the iconic Palm Jumeirah was in London at The Dubai Property Show last weekend, to woo British buyers with an emphasis on affordable homes and strong investment prospects.
“We’re very happy with the turnout,” Nakheel’s Chief Commercial Officer, Aqil Kazim, tells TheMoveChannel.com in an interview. “It’s not only the quantity but the quality – everyone seems to be genuine end users seriously looking to find out more about properties in Dubai.”
Walking the floor at the event, golf units at Tanmiyat’s Living Legends project start as low as £80,000, with buyers overheard enquiring about their location in Dubai. “Have you been before?” asks one salesperson. “No, I’m local,” comes the reply.
It’s a marked shift from the type of people who were queuing up to invest in Dubai a few years ago, when the emirate was bouncing back from the financial crisis of 2008.
“2008 was a lesson learned…”
“2008 was a lesson learned,” acknowledges Kazim, “but Dubai was one of the fastest countries to bounce back from the crisis. It took us almost a year and a half, but we got the restructuring done.”
Between 2011 and 2015, the developer’s properties saw accelerated capital growth as high as 10 to 15 per cent every year, with some prime locations even higher than that. Now, the emirate is undergoing a shift from a speculator market to an end user market.
“This is what Dubai was looking to do anyway,” comments Kazim. “It’s very healthy. Today, we sell to end users more than speculators and this is what we’re all about. The situation in Dubai was… the speed at which capital appreciation was happening was just too fast and a lot of people wanted to jump on that opportunity, which is not wrong, but it’s not something that we encourage. We would like some speculation, but not the entire thing based on speculation.
“Reasons to invest are perhaps rental yield, perhaps the lifestyle of Dubai, perhaps you have family and friends there, perhaps you want a second home.”
Since the boom and bust and subsequent boom, the last year has seen the Dubai market cool slightly, with prices moderating. Kazim dismisses any concerns of falling values.
“I call that a correction more than anything else,” he says.
The slightly lower prices reinforce the emirate’s increasing focus on end users over investors, with buyers now able to get better value than before, argues Kazim, also highlighting the potential benefit for investors. In London’s prime sector, for example, yields are around 4 per cent, but in some zones in Dubai, yields can reach as high as 10 per cent net.
“Interestingly, rentals haven’t dropped as fast as prices have dopped, so the yields are actually increasing – again, it’s becoming more and more attractive for people who are looking into buying and investing and leasing or even choosing it as a home because they’re getting better prices. As far as Nakheel is concerned, we have projects in both high end categories as well as investment categories, so we have a variety of options.”
One project the developer is launching – Warsan Village – is a a three-bed townhouse starting at £330k.
“With this product, you could make Dubai your home but not necessarily invest into an expensive property,” he comments.
Certainly, the interest from overseas is strong: according to TheMoveChannel.com’s latest Top of the Props report, the UAE entered the portal’s Top 10 most popular destinations in April 2016 for the second time this year.
Bringing in the Brits
Why are Brits investing in Dubai?
There are a lot of similarities between London and Dubai, notes Kazim.
“Both are central hubs for trade, finance. The reasons to select Dubai are the sunshine throughout the year, the cultural scene is very compatible for what British investors look for – we have more than 170 nationalities in Dubai. A simple example I keep giving is the education sector: we have a lot of boutique syllabuses. If I were from Japan and I wanted my son to go to a Japanese school, that option is available. Korean schools. The number of British curriculum A Levels, GCSEs, all of them are available. We have a lot of Indian investors in Dubai. They have a number of syllabuses…”
With the UK referendum on the EU dominating media headlines in the UK, is the possibilty of a Brexit something that concerns Nakheel?
“As far as Dubai is concerned, it’s really business as usual,” says Kazim. “What it’s down to is really one question: do you want to make your home in Dubai? If the answer’s yes, that’s really the bottom line.”
Nakheel’s own bottom line is certainly healthy right now, with its profits up 8 per cent in the first quarter of 2016. The company is also looking to diversify its income streams, with a growing focus on the retail and hospitality sector. Is that part of the lesson learned from 2008?
“We’ve got to be agile and quick at reacting to opportunities,” says Kazim. “There’s a clear demand today for retail in the right locations. We have the locations, so it made sense for us to embark on these projects.”
“There’s a clear demand for 3-star hotels.”
The hospitality sector is a particular area of growth for Dubai. Just as the emirate is attracting more mid-level end buyers to its residential and investment property, the hotel industry is moving more from luxury clientele to average holidaymakers.
“There’s a clear demand for 3-star hotels,” notes Kazim. “Not to say that 5-star is not in demand, but Dubai’s target is to achieve 20 million annual visitors and tourists by the year 2020. We’re still quite far off – we’re at 14.5 million right now – so the number of rooms has got to increase.”
Nakheel is at the Dubai Property Show in London to market a range of developments, the majority of which are set for completion in the third quarter of 2016. Is oversupply a concern when launching several projects at once?
“That has got to be something every developer has got to think about,” says Kazim, but he dismisses some media reports of oversupply being a threat to Dubai’s real estate as “maybe unfounded”.
“We deliver projects on a feasibility basis and it has got to be able to fulfil some kind of demand for us to launch it,” he continues. “There are reports out there talking about oversupply. I don’t know, I’m probably an optimist, but you’re looking at a city that has ambitious growth plans in term of resident population. Even if that growth was half achieved, we would be in short supply, not oversupply. We wouldn’t be building projects if it wouldn’t be fulfilling a certain demand.”
Indeed, the market’s outlook is upbeat at present, as developers, agents and investors all look ahead to the World Expo 2020, which will be hosted by the city. Is the boost from that event already evident?
“I think now’s the time for it to start,” comments Kazim. “We’re in 2016, the event’s in 2020, and it’s a large scale project. We sell plots of land to third party developers. Those developers who bought land from us in the past have started to construct projects, purely because they’ve seen demand rising out of projects like Expo.”
The Wow Factor
One of the other signs of confidence in Dubai’s real estate industry are developers resuming work on major projects, including a number of eye-catching buildings. That attention-grabbing architecture has always been a signature of Dubai, which is famous for having the tallest tower in the world: the Burj Khalifa.
It is increasingly in danger of losing its title to other cities, though, as extravagant developments pop up around the globe, from London’s The Shard to Saudi Arabia’s Jeddah Tower. Is that flattery or rivalry?
“Competition is always good!” jokes Kazim, but there is a serious hunger for Dubai to be the top dog.
“Dubai is not a very old city – it’s been around for 50 years or so,” he adds. “We want to be competitive. And a lot of these [landmarks] are value propositions – having the tallest tower attracts tourists, having the biggest mall attracts a certain type of clientele.
“You will notice that the architecture of Dubai focuses a little bit on the vanity side, you’re quite right. It’s important to attract tourists on a repetitive basis – as a tourist, I want to be able to see something new every year. And that’s one thing that we’re thankful Dubai has been able to do, because it’s got this potential to grow, it’s been able to show something new every year, as opposed to maybe in the more established and developed cities. We want the wow factor!”
With enquiries for Dubai property on TheMoveChannel.com already up 50 per cent in May 2016 compared to April, that wow factor is certainly still there.
The Dubai Property Show next takes place in India from 14th to 16th October 2016.