All the indications are suggesting that the initial hype is easing and prices are settling. A year and a half ago 900 houses in one development sold out in 7 hours. Many believe that demand will continue to be sustained and prices will continue to rise, though not at the frantic rates they have been rising over the past two years.

In comparison to other new and emerging markets, such as those in Central and Eastern Europe, Dubai appears to be a more attractive investment. Prices in the middle market are comparative to those in Eastern European cities such as Tallinn and Krakow. Unlike these countries Dubai has the sunshine factor and a glamorous edge, which is surely contributing to the high immigration from Europe, the Gulf Region and the Indian subcontinent.  Over 100,000 extra people are expected to arrive in Dubai every year.  Such large-scale immigration is sure to sustain the property rental markets.

Other property markets are seeing rental yields drop through the floor. Too many investors buying up properties and not enough tenants to rent them! Ireland, Britain and many of the New European capital cities are seeing yields drop to below 3%. In Dubai, rental yields have dropped from a very healthy 8-9% but are now holding firm at 6-7%. The fact that in Dubai rents are paid in advance, sometimes up to one year in advance, is surely a motivating factor for those considering a buy-to-let property in Dubai. On the downside, service charges on new development can be high, anywhere up to £4000 per annum and may be requested by the developer upfront!

Many too are questioning whether Dubai can sustain the level of growth that the country is experiencing.  The property market may be developing at phenomenal rates but is the infrastructure developing with it?  Already, Dubai's main highway, Sheikh Zayed Road, is a congested bottleneck being the only major route in and out of the city.  Add to that the hundreds of thousands exiting Dubai's Palms [tourists, residents, maintenance workers, hotel staff etc] and you've got traffic mayhem.  One of the fastest ways to travel around Dubai could be on water taxis but in temperatures where the sea is too hot to swim in, how many people are going to want to travel in such uncomfortable conditions.  An air conditioned car is the only way to travel in Dubai.  Failure to moderate demand or accommodate it through improved infrastructure could lead to Dubai's downfall. 

Criticisms are also being thrown at government owned developers Nakheel who are accused of underestimating the cost of building their ambitious projects. Nobody really believed that The Palm Jumeirah could be build for £90 stg a square foot, the price early investors in the development paid. It was always expected that prices would rise, [standing now at £225 stg a square foot] to fund the project but now a huge amount of ambiguity now surrounds the number of housing units that will be built on the islands. Investors fear that the self proclaimed Eight Wonder of the World, may be an overpopulated congested nightmare. Estimates for the number of units being built on the Palms are increasing all the time. On the crescent of Palm Jumeirah, 26 boutique hotels with 12,600 rooms are being built, many of these having doubled in size from original plans. Having grossly underestimated the cost of building the Palms, Nakheel have responded by increasing the housing stock. The big question is can the 5 lane each way trunk support the additional traffic?

So what's on offer in Dubai for those of us who can't quite afford the luxury of Le Reve? Dubai Property Link are offering a one bed apartment on Palm Jumeirah for £183,241. Not a bad price tag for a pad on the same stretch of man made land as Posh and Becks!  A four bed luxury golf home in Emaar's Arabian Ranches development will set you back €486,000.  All of Emaar's villas are built in traditional Arabic architectural style, and buying here is as much about lifestyle as anything else, with equestrian facilities, abundant shopping centres and top class restaurants nearby.  At the top of the scale, €2 million will make you the proud owner of a 7000 sq ft lake view signature villa on one of the Palm Islands with all the advantages of the world class amenities and entertainment that the Islands promise.

Despite the current boom and huge immigration into Dubai cautious investors are raising understandable questions about the safety of investments in the UAE. The Dubai freehold market is only a year old, a move introduced to calm investor's fears about the long term security of their investment. However, the UAE allows individual emirates to issue their own legislation to regulate ownership of real property. While Dubai is committed to encouraging overseas investment, they rule by decree and decisions can be changed overnight on the whim of the current ruler. So while tourists and investors can enjoy the relatively liberal environment, one simple change of rule could bring the country in line with the other Emirate States making it an alcohol free zone... bad news for tourists. Given the pace of development and the long term plans for the country, it is unlikely however that this will happen. 

If the property market in Dubai is to develop with any degree of stability, capturing the interest of second homeowners and expats seeking to relocate is essential.  If the market continues to be speculator driven, the possibility of a speculative bubble is not unlikely. However, the recent revision of property ownership laws for foreign investors should encourage a more stable property investment climate, helping to avoid any crash that might be caused by a quickly exhausted investor base of opportunistic speculators.

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