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DUBAI - Dubai’s economy recorded two per cent growth in the first quarter of this year compared to the same period in 2008, sending a clear signal that the emirate has weathered the worst phase of the financial crisis gripping the world, a top government official said on Wednesday.

Dr Omar bin Sulaiman, Governor of the Dubai International Financial Centre, or DIFC, said that although it took a few months for Dubai to adjust to the abrupt slowdown after several years of consistent fast growth, the signpost of recovery was visible by the end of January.

“We have seen a two per cent growth in real gross domestic product in the first three months of this year. It may get better over the coming months, and I expect an overall growth of between two and three per cent for the whole year,” he said.

Addressing the British Business Group, the DIFC governor said the UAE Central Bank’s conservative policies helped greatly to ward off the impact of the global financial meltdown on the nation’s financial services industry. “The Federal government and the Central Bank are working very closely to steer the economy back to normal with liquidity injection and other fiscal and monetary measures.”

Sulaiman said the major challenge the UAE economy faced at the onset of the meltdown was a crisis of confidence. People were shaken, and it took several months to come to grips with the new reality. “After speeding at 400km per hour, it will take some time to adjust if one has to slow down suddenly. That’s what happened with Dubai.”

Sulaiman maintained that the confidence level in the domestic economy had improved significantly, particularly after the successful $10 billion bond issue by the Dubai government. “The full subscription of the bond by the Central Bank helped to re-infuse confidence in the national economy by assuring that there is enough money in country,” he said.

International financial institutions have responded positively to the prospect of a second $10 billion tranche of bonds, which the government plans to issue soon, the governor said.

Asked how the Dubai government would deploy the second tranche of funds, he said most of the money would go into the economy, either as support for cash-strapped companies or through refinancing of corporate debts. On the slump in the real estate sector, he expected a rebound within the next few months as “the pricing was becoming right” to attract buyers.

“I firmly believe that the worst is behind us. For instance, even in January, DIFC received the same number of applications as in the same 2008 month for setting up new businesses. I expect Dubai and the UAE or the whole GCC will rebound much faster than the rest of the world as the confidence level is back and liquidity has started to build up.”

He said DIFC had put on hold its overseas investment plans in 2009. “We are still getting requests from other countries to set up DIFC-model operations. However, we will not focus on investing abroad for the next few months.” Quoting a recent survey released in London, Sulaiman said “Dubai still is the fastest growing financial centre even amid the global financial turmoil”

Sulaiman said Dubai’s real estate crisis differed from past property shocks in countries such as Singapore and Hong Kong. “In a way, we are lucky that it happened now as a result of the global turmoil. Even otherwise, it would have happened five to six years down the road given the fast pace of growth Dubai had been witnessing over the past few years.”

 APRIL 2009 RERA Rental Index. Suggested rental prices per area.

Dubai realty may see a price-floor 

The bid-ask spread in Dubai's residential market is narrowing, indicating initial price floors could be emerging, according to a new report.

"Listed prices of residential properties in select areas are moving towards the actual transactional values, indicating that listings are nearing sellers' lowest acceptable prices," Landmark Advisory said in the second quarter report on Dubai and Abu Dhabi residential market.

Bid-ask spreads in March primarily varied between 12 per cent and 33 per cent , but in some cases reached 44 per cent. In select areas and for specific projects, evidence is growing that spreads reached 44 per cent. In select areas and for specific projects, evidence is growing that spreads are coming down to within 10 per cent and 15 per cent.

This indicates that initial price floors could be emerging. However, bottoming-out is a slow and varied process that will depend largely on seller motivation and consumer demand.

"The investors left in the market are those who are not looking to sell in a hurry as speculators have already exited," Charles Neil, CEO, Landmark Advisory, told Emirates Business.

"We expect the first price floors to emerging in the fourth quarter as consumer demand defines one side of the price equation," said the report. Location, fitting, quality, available amenities and facilities, as well as the integration of the master development, will determine which areas and projects bottom-out first. Defining the other side of the price, equation are sellers, whose motivations are usually less homogeneous than buyer motivations, but are equally important in determining price equilibrium and finding price floors.

"The real estate prices in Dubai are not falling as much as they were before indicating that more people are holding onto their properties and not selling them," Neil added. "There are two reasons for not many sellers listing their properties for sale as they are opting to lease their properties instead of selling and the fact that they believe that the market has reached the bottom in certain areas."

Neil said that in areas such as Dubai Marina, Palm Jumeirah and Emirates Living real estate prices are not coming down.

In Dubai, residential sales volumes are low, and average residential sale prices have declined by 23 per cent to 32 per cent. Controlled samples show rental rates have declined nine per cent to 41 per cent since fourth quarter of 2008.

In the first quarter, the average sale price for apartments decreased 23 per cent to Dh1,146 per square foot, while average sale prices for villas decreased 32 per cent to Dh1,076 per square foot.

Residential leasing is currently restructuring, as tenants upgrade, generally preferring larger and / or better-located units over discounts on existing accommodations. Tenants are giving their studios and moving into the one or two-bedroom apartments, while others are exchanging apartments in favour of villas.

Dubai's current residential sales prices are currently at fourth quarter 2007 levels, with year-on-year declines of four per cent for apartments and nine per cent for villas.

Sales are currently centred on high-end master developments that are closer to completion. Approximately 40 per cent of sales in the last quarter occurred in the Dubai Marina/ Jumeirah Beach Residence area.

New leasing contracts in Dubai

Dubai Marina was the most popular area for all leasing, accounting for 30 per cent of all new lease contracts in Dubai. Around 16 per cent of new annual contracts were for units in Emirates Living. Jumeirah Lake Towers, Jumeirah Beach Residences and Downtown Burj Dubai each represented approximately 10 per cent of all new annual leasing contracts.

Short-term leasing showed similar trends. Dubai Marina and Emirates Living were the most preferred locations, together constituting over two-thirds of the short-term leasing market.

For villas the most popular area to rent is Emirates Living recording around 40 per cent of all new annual contracts, followed by Mirdiff and Jumeirah/ Umm Suqueim.

Similar trends were also observed in sales with the Dubai Marina and Jumeirah Beach Residence area proving most popular among buyers.

In Dubai, about 24,000 housing units are expected to be delivered in 2009. With 24,000 housing units to be added into the market and the vacancies caused by emigration, Landmark Advisory said a 30,000 to 52,000 units surplus can be expected in the market depending on absorption patterns and actual rate of population decrease.

The report said there has been a strong sales trend favouring Emaar master developments and units developed specifically by Emaar. Approximately two-thirds of all property transactions in the data sheet were for units in Emaar's master developments, villa communities, and apartment complexes. Over half of all units sold were developed directly by Emaar.

Leasing transaction patterns generally mirrored sales trends. Around, 57 per cent of new residential unit leases were in Emaar master developments.

In Sorouh's secondary market however, the transactions have retained premiums over primary levels. Aldar's units average closer to primary market prices.

"Real estate prices will not go up a lot as financing is still limited. Prices will remain status quo as it is currently until next year. However, there is more activity being recorded as rental yields are high in Dubai at average eight to 15 per cent," said Neil.

Abu Dhabi

In Abu Dhabi, the trends are slightly more advanced, with confidence starting to solidify and price floors emerging based on the primary market price for each development.

End-users constitute the majority of current demand, as investor interest has abated. Prices increasingly differentiate according to consumer preferences and the changing buyer profile.

Proximity to the existing central business district on Abu Dhabi Island is becoming a key factor of end-user demand and prices.

Competition

Abu Dhabi faces growing competition from Dubai's increasingly affordable leasing market, which continues to attract more residents from the capital.

Having sky-rocketed in 2008, rents in Abu Dhabi stabilised in first quarter of 2009, and fell marginally in some cases. Since fourth quarter of last year, apartment rents were stable, while villa rents declined 10 to 15 per cent. Further rent cuts are likely due to increased unit supply in the capital and the growing attraction to Dubai's lower prices.

Dubai marina beach

Dubai marina yatch club

Great VIDEO of the amazing Dubai fountain at the opening ceremony

http://www.youtube.com/watch?v=8McTFXaMPg8