Article from the Times
THINKING of buying in Dubai? Be prepared to spend a lot of time staring at holes in the sand. Although a high-rise fantasy world is emerging from the desert at a most astounding rate, it is still early days in this ambitious corner of the United Arab Emirates.
The movers and sheikhers want to build bigger, taller and better than anything you have seen so far. As well as the now familiar plans for the Palm Jumeirah archipelago of islands emerging from the Gulf, there are three more sets of man-made islands in the pipeline that will triple the size of Dubai’s coastline.
Then there are plans to create Dubailand, a vast tourist resort bigger than Disneyland and Disney World combined, with its own Eiffel Tower, Taj Mahal, Great Pyramid of Giza and dinosaur theme park. No wonder a fifth of the world’s building cranes are here.
Donald Trump once said that development in Dubai was limited purely by imagination and the laws of physics. He’s right. Dubai has been poorly compared with Las Vegas and New York, but this desert city is pure science fiction. Think Fifth Element, not Fifth Avenue.
The workforce to turn these dreams into reality comes from around the globe. From the Bangladeshi builders in blue and green boiler suits who toil like ants around the clock to the slick European salesmen on the make, all are drawn here by the promise of money. Only 20 per cent of the 1.2 million people living in Dubai are home-grown. The rest hail from 180 nations.
The so-called economic miracle of Dubai is no accident. Although the transformation of Dubai from small Bedouin trading settlement to a futuristic city was prompted by the discovery of oil, this is not an oil-rich country. Reserves are running out and Dubai has been busy reinventing itself as the new playground of the Middle East and as an international financial hub.
There is no corporate tax, no income tax, no foreign exchange controls and no trade barriers. What you do have is a relatively tolerant and stable regime hungry for status among the international community. Under the watchful eye of Sheikh Mohammed Bin Rashid Al Maktoum, 40 per cent of this year’s budget was allocated to building new infrastructure. There are plans for a metro and an airport that will serve 120 million passengers. To attract even more investment, property laws and building regulations are being brought up to Western standards. This year foreigners were given the right to buy freehold homes in designated areas for the first time. There is also talk of introducing a building code in line with UK and US practice to regulate construction. So far, there is nothing preventing shoddy workmanship and at least one developer is reported to have run off with investors’ money.
Bigger players such as the Cheshire-based developer Dubai Select hope that the changes will give investors greater confidence. The company is building three residential schemes, The Point, Bay Central and The Torch. All three developments are being built around Dubai’s marina, which is set to become prime expat territory once building work is complete. The earliest scheme, The Torch, has 504 flats spread over 74 storeys. Prices here range from £135,287 for a one-bedroom apartment to about £270,504 for a three-bedder. Although this is little more than a hole in the ground, 95 per cent of the units have already been sold.
Buyers might find more choice at The Point, which is at the farthest end of the marina, and Bay Central which, as the name suggests, is in the middle. These two schemes are convenient for reaching the beach but The Torch is closer to Sheikh Zayed Road, Dubai’s main artery, which links the resorts with the old town on Dubai creek. A tiny studio sets you back £82,300 at The Point. But the cost of a four-bedroom villa goes up to £615,377.
Bay Central is a far larger development with three towers, one of which will be a five-star hotel.
The two residential towers, Bay West and Bay East, contain 388 properties each. These include studios from £79,950. For £743,367 you can get a five-bedroom penthouse with five balconies and a private spa bath. All three developments come with swimming pools, spas, shopping facilities and concierge service.
If you think it sounds like bliss, just wait until you see the investment projections. According to Dubai Select, those buying in The Point can expect a return of just over 50 per cent over five years based on the company’s payment plan and an annual growth of 14 per cent.
Dubai Select estimates that investors in a two-bedroom apartment who choose to let rather than sell can look forward to a net rental income of £8,000 a year. Mark Stott, the firm’s managing director, says: “We have customers from all over the world but the vast majority are British and Irish. Typically our customers buy as a short to medium-term investment, but some plan to move to Dubai when they retire.” In other words, most people buying in Dubai do not appear to be in it for the long term. Snapping up property off-plan and selling on well before completion is a common practice that has served speculators well so far. But can it continue? The emergence of Dubai is based on the theory that “if you build it, they will come”. Last year more than 11,100 businesses registered in Dubai, including Microsoft, CNN, Nokia and Marks & Spencer. According to official data, Dubai’s population is expected to rise to 1.4 million in 2010. The city is estimated to need at least 500,000 additional homes in the next ten years.
But the property market has already slackened, and with building continuing at such a frenzied pace there are fears that oversupply could provoke a slump. There is no guarantee that businesses and people will continue to flood into the region. Buying here can only be seen as an act of faith. Mark Stott put it simply: “You either believe in Dubai or you don’t.”
SUSAN EMMETT
Dubai Select: 0870 1110000.
www.dubaiselect.com