Hot Dubai real estate holds allure

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Hot Dubai real estate holds allure

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High-rise buildings are packed together in the western downtown area of Dubai, the host country of the 2020 World Expo. The emirate’s rebounding real estate market is attractive for Korean investors and builders. Photo by Song Su-hyun

DUBAI - On Nov. 27, the tiny Persian Gulf emirate was sleepless with massive fireworks erupting into the dark sky from the iconic Burj Khalifa Tower to celebrate being chosen to host the 2020 World Expo.

“Expectations are rising among realtors and consultants that Dubai properties are going to reach a peak next year,” said a Korean realtor surnamed Park, who runs a tourism and property agency in the Dubai Marina area, where many Korean expatriates reside. “Some Korean investors and business people consider buying properties here as they compare the promising outlook for the Dubai market with a dismal property market in Korea.”

After being sliced in half following the Dubai government’s moratorium on debt obligations in 2009, the property market of Dubai, one of the oil-rich United Arab Emirates, is on a solid path to full recovery, expecting another peak next year.

According to real estate insiders, Dubai property prices have risen faster than expected since last year, backed by the government’s determination to develop the world’s largest shopping and hotel complex, and its goal to double the number of foreign tourists to 20 million per year.

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Dubai ruler Sheikh Mohammed bin Rashid announced in November last year his plan to build a city encompassing the world’s biggest shopping mall, park land and more than 100 hotels named Mohammed bin Rashid City. The park will be 30 percent larger than London’s Hyde Park. The Mall of the World will surpass Dubai Mall as the largest on earth.

“The current facilities available in Dubai need to be scaled up in line with the future ambitions for the city,” Sheikh Mohammed was quoted as saying to The National, the first English-language publication of Abu Dhabi Media. “Our development initiatives concerning infrastructure in all sectors should be aligned with this growth rate, and we have the determination to reach our objectives and be the first in the region to achieve them.”

“The market is picking up faster than expected,” said Abhinav Bhandari, director of MBC Realty. “Expo will have a very positive effect on the economy. Over the next seven years there will be a solid real estate market, with the government having learned from the crash in 2008 and prices will increase steadily at reasonable levels.”

According to a report by U.K.-based real estate research institute Knight Frank, Dubai recorded the largest jump in housing prices - 28.5 percent - among emerging countries for the 12 months ending with the third quarter. China followed with 21.6 percent and Hong Kong 16.1 percent.

In stark contrast, Korean housing prices retreated 0.7 percent during the same period, according to the report.

Cluttons, a real estate consultancy in Dubai, said in a recent report that prices are currently 47 percent above the bottom of the market in the second quarter of 2009, but 26 percent below the market peak in the third quarter of 2008.

Detecting some signs of the market heating up again, the Dubai government in October released regulatory measures to slow the rise. The Dubai Land Department doubled property registration fees to 4 percent, and the UAE Central Bank established mortgage caps to restrict the amount of loans.

The Cluttons report said the recent regulation already is having impact on the market, stemming additional sharp increases in property values.

“For the past four years, it was visible that the Dubai economy was rebounding along with favorable signs in the real estate market,” said Son Joo-hong, a senior manager at Korea Trade Center in Dubai. “The country’s GDP is growing steadily at about 4 percent with an abundance of foreign exchange reserves.”

According to the Economic Intelligence Unit’s country report, Dubai’s GDP is forecast to rise 4.3 percent this year, continuing to revive from 4.8 percent fall in 2009. Its trade balance jumped from $42 billion in 2009 to $128 billion last year. Foreign exchange reserves are projected to stand at $58 billion, up from $26 billion in the moratorium year.

Still, how the recovering property market of Dubai will affect an economy that defaulted on massive debt five years ago remains to be seen.

The International Monetary Fund said in a July report that the UAE economy is getting a boost from its rebounding real estate market, but the Dubai government and related entities still have about $142 billion in debt.

“The remaining debt could serve as a major hurdle to the recovery of Dubai and its major development projects,” Son said. “Next year alone, the country has to restructure about $50 billion in debt.”

When the ambitious Mohammed bin Rashid City project will break ground isn’t definite, and numerous development projects have been on hold since the 2009 crisis, including the iconic Palm Jumeirah and Palm Deira projects.

Signs of buoyance in the Middle East country, considered a land of opportunity for Korean construction companies, raise hopes for expansion into the region.

“When some of the stalled projects restart, hopefully Korean builders could get chances to participate,” said a spokesman at Samsung C&T, which withdrew from the Palm Jumeirah project.


BY SONG SU-HYUN [ssh@joongang.co.kr]

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