Commercial and residential rents in Dubai are set to return to "realistic" levels in the coming years as several large developments come on stream, supply matches demand and the emirate's booming real estate market begins to cool, according to Mr. Mohamed Ali Alabbar, Director General of the Department of Economic Development.
Addressing an audience of investment professionals earlier in the week, Mr Alabbar, who is also chairman of Emaar Properties, a Public Joint Stock Company listed on the Dubai Financial Market, said that many of these developments were due to be completed in the next couple of years, and that this would drive down rents.
"The pressures that have arisen from costs escalation and demand outrunning supply meant there were some who were priced out of both commercial and residential property. We have a Government that operates an 'open economy' policy. So it is left to market forces to determine prices. Currently, demand far outstrips supply but that will change," he stated.
However, Mr Alabbar went on to assure investors that returns on real estate investment would remain "healthy," as will premiums in the secondary market.
"A realignment of rentals, moving them downwards, would have no significant effect on returns for investors," he predicted.
Mr Alabbar also foresaw a bright economic outlook for the city of Dubai in general, as well as for Emaar, particularly with the prospect of legal reforms allowing foreigners to buy freehold property in the UAE.
"The property market is going through a boom period and I am very bullish about prospects for the City and Emaar. With new property laws imminent and some of the heat taken out of rentals I can only see the property market broadening," he observed.
"This is the reason why Dubai is a focus for real estate investment throughout the region and into the Indian subcontinent, where there are some 500 million people with significant buying power who are no more than two and a half hours flying time away. This is a market primed for growth and expansion," Mr Alabbar added.
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