Dubai Property at the End of the Century

The end of a century is a natural moment to take stock. Dubai finishes 1999 as a confident, fast-growing city with ambitions that would have seemed unlikely a generation ago. Its property market, however, remains small and closed by international standards. The gap between the city's ambitions and the structure of its market is the most interesting feature of Dubai real estate today.

What went well this year

• Tourism: new resort hotels opened and the Burj Al Arab is about to open, giving the city a global icon.
• Business: plans for a technology-focused free zone, Dubai Internet City, were announced, adding to the success of Jebel Ali.
• Infrastructure: investment in roads, the airport and utilities continued apace.

The constraints

Ownership remains restricted to nationals in most cases, so international demand cannot flow directly into residential property. Mortgage finance is limited, transaction data is scarce and there is no single, transparent registry that investors can rely on for comparable sales. These are the features of a market in its early stages.

Questions for 2000

• Will the government open parts of the market to foreign buyers?
• How quickly will the new free zones fill, and where will their employees live?
• Can infrastructure keep up with growth along Sheikh Zayed Road?

Lessons from other emerging markets

Property markets that open quickly to outside capital often go through a familiar sequence: an early phase of rapid price growth as pent-up demand is released, a period of heavy construction as developers respond, and then a correction if supply overshoots or financing tightens. The markets that come through this cycle best are those with strong institutions, clear title, transparent data, sensible lending rules and protection for buyers who pay in advance for homes that are not yet built. If Dubai opens its market, these institutions will matter as much as the projects themselves. Investors should watch not only for the headline announcement of foreign ownership but for the details of registration, escrow and dispute resolution that would make such a market sound.

Our outlook

We enter 2000 with cautious optimism. Dubai has the ingredients of a major property market: a growing population, a diversified economy and determined leadership. What it lacks is a framework that allows outside capital to participate easily. If that changes, the market could develop very quickly. Until then, our advice is to study, plan and build relationships, so that our clients are ready when the door opens.