Why you should consider real estate investment in Dubai in 2008

Dubai has gained popularity for its shopping festivals and as an excellent tourist destination. However, if you are down there for some sun ‘n’ sand, it would be definitely worth your while to check out the profitable real estate market in Dubai.

I read an interesting article on the possibility that in 2008, real estate in Dubai could outprice that in London. Sounds outrageous? Maybe not.

Here are 5 solid reasons why you should consider Dubai as an attractive destination for real estate investment in 2008.

1. Low absolute prices of real estate in Dubai

The real estate market in Dubai was opened to foreigners only in 2002. Since then, the prices have gone up considerably, but there is still plenty of scope for property prices to rise further.

This is largely because Dubai is fast turning into a world-class place, but the property prices are still to catch up. A survey by HSBC said that house prices in Dubai are lower in absolute terms when compared to similar cities across the world. Looking into the future, this is a clear indication that property prices will definitely see an upward trend, so you can still make a nice little profit for yourself.

2. Huge supply - demand gap in completed properties

There is an amazing amount of development going on in Dubai at the moment. A 2006 article in Gulf News said that 15 to 25 percent of the world’s cranes are in Dubai.

But experts claim a lack of manpower and materials is nevertheless causing a shortage of completed properties.

This ensures that at present, the demand for properties continues to outstrip the supply - another reason for property prices to continue rising.

3. Low cost of borrowing and better mortgage options

The Dirham in Dubai is pegged to the US dollar. As the interest rates dip in the US, there is a strong possibility of cheaper finance being available in Dubai as well.

Additionally, until some time ago, the mortgage market was pretty immature in Dubai, with just one lender. Currently, a number of major players have entered the market, including HSBC, Lloyds and Standard Chartered, so there are a larger number of payment options to choose from.

Cheaper finance options will attract more buyers, creating an upward pressure on prices.

4. High rental costs

The rental yields in Dubai are in the region of 7 to 10 percent. The high cost of renting a property in Dubai makes purchasing the property a more attractive option, especially if you are planning to stay there. If not, you can let out your property to get good rental returns.

5. Stable real estate investment scenario in Dubai

This is a good time to buy property in the entire Middle East as the outlook is positive, with Moody’s Investors Services giving a favorable report to the Middle East real estate scenario.

Dubai remains an extremely attractive destination within this region. Since opening up the real estate sector to foreigners in 2002, the government is doing all it can to ensure an investment friendly environment. So much so, the government itself owns three of the biggest property developers in Dubai - Dubai Holding, Nakheel, and Emaar Properties, which compete with other large private real estate developers like Damac Properties.

Dubai is one of the most cosmopolitan and urbane places in the Middle East and its booming real estate market is should definitively be on your watch list if you are looking to invest in off-plan property abroad.