Dubai property market untouched by inflation
Upon studying the current trend of inflation across the UAE, we observe that contrary to expectations, property prices have been steadily heading north instead of declining. The total value of land transactions in Dubai last year was US$12.94 billion, according to Land Department. Some 2,329 land plots were sold in Dubai during April-June this year with a combined value of US$7.74 billion as against US$2.94 billion for the same period in 2007. This reflects an overall rise in prices and demand for space across the emirate.
Inflation in the UAE is driven mostly by increased consumer spending. However, according to Merrill Lynch, the consumer price index (CPI) in the UAE will slide to 8 per cent by the end of 2009 after scaling 12 per cent this year. Inflation notwithstanding, the UAE economy is expected to experience a sustained growth with its nominal Gross Domestic Product (GDP) attaining 24.5 per cent growth - from US$192.6 billion in 2007 to reach US$239.9 billion in 2008, says Mohsin Khan, Director of IMF's Middle East and Central Asia Department (MCD). "Spiralling rents which account for more than 50 per cent of the consumer price inflation will soften with more residential units coming to the market." Merrill Lynch has predicted that the UAE's real gross domestic product is likely to decline to 6.1 per cent for the coming year after registering a rise to 6.4 per cent this year.
Thus, it may be concluded that the real estate industry in Dubai has been relatively untouched by ongoing inflation. The land sales in the emirate are expected to go up still further in coming months as the Dubai Strategic Plan 2015 gains momentum. The demand for space which is augmented by the developmental policies of the Government of Dubai is expected to hold strong in the future, thereby sustaining the realty boom well beyond 2012.
