Key investor factors in Dubai real estate

Dubai's property sector has gone from boom to bust in less than nine months. Motionless cranes in desolate building sites are a stark reminder of the seaside emirate's dramatic property bust.

The following are issues investors are watching closely:

HOW LONG WILL DUBAI'S PROPERTY SLUMP LAST? Property prices in Dubai soared after the emirate opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments.

But the bubble has burst, developers are cancelling or delaying projects and thousands of jobs are being cut.

Slumping demand would drag residential real estate prices down 50-60 percent this year from 2008 peaks, EFG-Hermes said in a research note this month. The market is unlikely to begin to recover before some time in 2011, it said.

GREATER CLARITY ON PROPERTY LEGISLATION ? The United Arab Emirates said earlier this month it would grant expatriate homeowners multiple-entry visit visas allowing them to stay six months at a time if they own properties worth at least 1 million dirhams ($272,000).

Property buyers have been waiting for legislation for years to clarify their residency rights.

But more clarity is needed as it remains unclear how expatriate buyers living in the emirate will be affected by the new resolution. It is also unclear whether the 1 million dirham tag is at the time of purchase or the current selling price.

Many units are now selling for less than 1 million dirhams, according to real estate brokers.

WHO IS GETTING GOVERNMENT CASH ?

Dubai sold $10 billion of bonds to the United Arab Emirates central bank in February to raise funds to support state-linked companies suffering from the crisis. But authorities have said they do not intend to reveal the recipients.

Nakheel, the state-owned developer of the emirate's palm-shaped islands, said it is receiving funds.

Emaar Properties EMAR.DU, the largest-listed developer, said it had no need for financial support.

Nasser al-Shaikh, former Dubai Department of Finance director-general, said key beneficiaries were real estate companies in which the Dubai government holds some ownership states.

Source: Reuters 20 May 2009