SHARM EL-SHEIKH, Egypt, 23 May 2006 — A new real estate law will delay a widely anticipated real estate downturn in Dubai by attracting more investment into property, especially from foreign institutions, a top government developer said. The Gulf emirate of Dubai — home to man-made islands shaped like palm fronds and a ski slope in the desert — started the regional property boom in 2002 by opening its real estate market to foreign investment.
Property prices have since quadrupled in some segments, drawing billions of dollars into new developments. Analysts expect the market will peak in the next year and the central bank warned last year of a correction starting around March.
But Farhan Faraidooni, chief executive of Sama Dubai, said a new law announced in March to remove uncertainty surrounding foreign ownership of property had forced him to revise his view of the real estate cycle. Sama Dubai is the property development and investment arm of Dubai Holding, the government-owned firm that invests the emirate’s wealth.
“We were anticipating that the market would correct itself in a year...a year and a half. A lot supply will reach the market (then),” Faraidooni told Reuters in an interview.
“(The law) has been introduced at the right time. It has given a boost and prevented the market from having a shorter cycle,” he said on the sidelines of the World Economic Forum that concludes in Egypt yesterday.
Faraidooni, whose company has around $40 billion worth of projects in the pipeline, said it was too early set a new date for the cycle’s end, but said the new momentum would add at least another year to the boom. Although foreigners have been buying property in Dubai, one of the seven emirates in the oil-exporting United Arab Emirates, for several years, the legal basis of their holdings has been ambiguous at best.
Most buyers have been retail investors, either Gulf Arabs looking to invest growing wealth from an oil boom or Westerners drawn to Dubai’s relatively affordable lifestyle. Dubai says its new law will offer expatriates limited freehold ownership and formal 99-year leases. Similar laws are in the works across the UAE.