Houston and Dubai are two of the hottest real estate markets in the world today, and we are fortunate the Houston Association of REALTORS® is the National Association of REALTORS® Ambassador Association to the United Arab Emirates (UAE), of which Dubai is a member and the leading real estate market. Houston and Dubai have been inexorably linked for many years through oil and gas investment cooperation. During the past several years, Houston and Dubai have become more closely linked through real estate investment cooperation between Houston real estate investors who are interested in investments in the UAE, and with UAE investors who are increasingly interested in real estate investment opportunities in the Houston metropolitan area, including residential, commercial, and land investments. Direct daily air service between Houston and Dubai by Emirates Air has been an additional catalyst for the expansion of investment cooperation between these two dynamic real estate markets.
Recent real estate market research indicates the Dubai property market will continue to be steady for the balance of 2015 before supply shortages boost prices again during 2016-2017, according to DAMAC CEO Hussain Sajwani, a leading real estate developer in Dubai and the UAE. Dubai residential prices fell 49 percent from a peak in the third quarter of 2008 to the market bottom in the second quarter of 2009 according to real estate consultants Cluttons, following a supply glut and the UAE debt crisis during that period. Real estate prices subsequently recovered as an influx of cash and investors from troubled parts of the Middle East ignited a property rebound, although Clutton’s estimates residential prices at the moment remain approximately 18 percent below the 2008 peaks. The consensus view among large property developers and investors in the UAE is for prices to fall somewhat during the balance of 2015 as increased property sales taxes, stricter mortgage rules, and a lack of affordability cool off the past two years strong upward market momentum.
So called “negative premiums” are starting to show up in Dubai’s property market, in some cases 5-8 percent discounts off of original offering prices. This is most apparent for the ultra-luxury properties located in both established locations and in emerging locations in Dubai and in other areas of the UAE. At the same time, according to sales tracker Reidin, while secondary market activity has slowed down where there are price reductions on offer, these properties are selling quickly. Reidin advises that Dubai is currently in the midst of a property consolidation/correction and in most instances investors are currently bargain hunting given Dubai’s and the UAE’s projected growth trajectory over the next several years. (UAE Government projections)
Standard & Poor’s (S&P) reports the UAE property market is likely to soften somewhat for the balance of 2015 and into 2016; however, there is no current fear of a repeat of the 2009 crisis. S&P reports the UAE’s diversified economy, population growth, new tourism projects coming on line, and the introduction of protective measures, such as the loan-to-value cap on mortgages and developers’ mandatory utilization of escrow accounts, should help prevent a real estate crisis similar to that experienced in 2009. S&P reports non-UAE investors dominate real estate investment in the UAE and in many cases their investment power is unaffected by the decline in oil prices.
Cluttons, the property consultancy, advises demand for residential properties in the UAE is expected to remain stable in the medium to long term (12-24-36 months), particularly as the government continues to drive economic diversification which will accelerate job creation. In the commercial market, Cluttons reports prime Grade A rents ended 2014 up almost 14 percent, while more secondary stock recorded a 24 percent increase during 2014. Cluttons sees stability in the commercial market for the balance of 2015 coupled with a lack of commercial space and strong demand going forward for commercial lease space across all UAE member States. The Dubai Economic Department Business Confidence Survey reports that 69 percent of survey respondents indicate they will invest in business capacity expansion over the next 12 months and the Dubai Government reports the outlook for business generally remains very upbeat. These factors will continue to drive an active real estate market in Dubai.
Houston and Dubai are increasingly linked through expanded business cooperation. In view of the expansion of ties between Houston and Dubai, the UAE opened a Consulate in Houston this year and appointed a Consul General furthering Houston-Dubai investment opportunities.
Bill Gottfried is currently the HAR International Advisory Group Chairman and in the past served as the NAR President’s Liaison to the UAE and the Chairman of the International Committee of the Texas Association of REALTORS®. He began his career as a U.S. Naval Officer in the Middle East managing oil contracts with refining companies in Bahrain, Saudi Arabia, Kuwait, Iran, and Yemen. He is the Managing Director and Broker for Gottfried International Estates in Houston.