Dubai realty tops in transparency
To the relief of investors in Dubai's action-packed real estate market, transparency is set to be improved further by implementing regulations in the future, according to an industry report.
Dubai is the most improved city in terms of real estate transparency, making it the most transparent market in the Mena region, as highlighted in a real estate transparency index by Jones Lang LaSalle.
"Dubai is even rated above BRIC countries -Brazil, Russia, India and China - which represent the growth and future of world business and economy," said Blair Hagkull, managing director of Jones Lang LaSalle, Mena region.
This improvement is mainly attributed to the creation of the Real Estate Regulatory Authority (Rera), the law allowing foreigners to buy property.
However, Hagkull also said, despite the improvements in Dubai's market, it "still has a long way to go to catch up with mature markets", such as London and New York. As truckloads of money is poured into Dubai real estate, many property disputes also bubble to the surface.
"The issue of dispute resolution plays a key role in trying to achieve a tier two market," Hagkull said.
To rectify this, Rera is planning to create a real estate court to deal specifically with disputes, as part of efforts to improve the transparency of the market.
However, Rera were unavailable for comment.
The transparency index evaluated 82 cities and countries around the world between 2006 and 2008.
The index illustrates transparency within five tiers, ranging from highly transparent, tier one, to opaque, tier five. The UK, US, France and Canada are in tier one and Dubai is a tier three or semi-transparent.
Transparency is increasingly important in Dubai as foreign investors flood in and the real estate market booms.
"Ten years ago, none of us [expatriates] could buy real estate. In less than ten years, this city, this country has come to the forefront of real estate around the world," Hagkull said.
Hagkull estimated that real estate transactions for 2008 will be a staggering Dh700 billion.
Craig Plumb, head of research, Jones Lang LaSalle, Mena region, said 20 per cent of housing units in Dubai is on a freehold basis, but by 2010 this will increase to 80 per cent.
There is also intensive work being done by various government departments and real estate services companies to prepare further reports in the future to cement real estate transparency in Dubai.
"Local indices are being prepared and Rera is at the forefront of that," Plumb said.
Although investors in Dubai real estate seems to be preoccupied with chasing higher returns, Hagkull said this cannot continue if Dubai is to mature.
"As a market matures, it becomes less volatile. Investors invest in mature markets because although they get lower returns, they are less risky places," said Hagkull.
