Thursday, July 24, 2008

Tourism growth bring prosperity to Dubai property sector

Real estate in Dubai continues to bring in prosperity to property sector recording double-digit annual revenues, the report said.

The property boom in Dubai is being driven by factors such as high population growth rates, increasing demand from expatriates, and strong regional liquidity.

According to a report by Lehman Brothers on "Dubai Inc: Credit Overview and Relative Valuation", tourism accounts for 30 percent of Dubai's GDP, with no sign of slow down being seen in near future in the tourism-oriented realty developments and increased airline services.

Dubai is fast emerging as a real estate, financial and tourism hub, as well as an oasis of stability in a troubled region, reveals report. Taking into account the supply-demand imbalance and prices in real estate sector, it looks like the Dubai property sector will remain elevated during the next couple of years, and thereafter, the bulk of properties that are currently under construction will near completion.

The property sector continues to remain attractively priced, offering good return on investments. However, with the ambitious growth strategy of the emirate, there is a risk associated with continued heavy supply that could weigh on technical, the report states.

The government is also eager to double annual passenger movement from 8million to 15million by the year 2015. With the corporate being closely monitored by the sovereign, they operate as commercial entities and are not subjected to interference in their operations, says the report.

As for the potential risks, the report states that although realty sector slowdown has been long expected, it is yet to happen. But, once the new supply hits the market during next couple of years, a slowdown is likely within the sector, and the focus would then be shifted to other developing stories in the region.

The rapid pace of development is placing increased strain on the price and availability of construction materials and supply of labour, all of which could lead to considerable growth barrier.

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