A new study by research organisation Unitas analyses the real causes of Dubai's economic growth – and shows that the emirate's economic growth of the last 24 months is based on some solid factors, and not speculation
Date: Dubai, October 09, 2013 : The revival of Dubai's economy over the last 24 months is supported by fundamentals centred around four key factors – increased business activities, population growth, continued government spending on infrastructure development and an increase in Foreign Direct Investment aided by the knock-‐on eﬀects from the Arab Spring, according to Unitas Consultancy, a Dubai-based asset management and advisory firm.
It's latest research report titled, Dubai: If You Build It, They Will Come, analyses various data and statistics issued by Dubai Land Department and other credible sources on the new developments across Sheikh Zayed Road, Mohammed Bin Zayed Corridor that shows that the surge in economic activities is fuelled by strong underlying fundamentals and not mere speculation.
The research shows that prices of properties have appreciated 15 per cent and rents increased 11 per cent year on year.
As Dubai begins to build out its infrastructure, the supply is more gradual and measured relative to the last decade – 35 per cent less supply being injected into the market annually over the next 3 years relative to the prior decade, research shows.
“As Dubai recovers from the crash of 2008, we see strong underlying fundamentals supporting this recovery. A continued growth in the population at 5.6 per cent Compound Annual Growth Rate (CAGR) over the last six years, a 26 per cent increase in foreign direct investment (FDI), an 8 per cent increase in the number of trade licenses issued by the Department of Economic Development (DED) year-on-year, has lead to a steady increase in the emirate's gross domestic product (GDP) at 5 per cent year-on-year,” Sameer Lakhani, Managing Director of Unitas Consultancy, said. while releasing the report today.
“A sustained growth in the tourist population, coupled with continued infrastructure developments will be centre of Dubai's sustainability going forward.”
The construction sector has been a crucial part of Dubai's GDP, representing 15 per cent within the last two decades as Dubai has evolved itself into a trade, finance and tourism hub.
“The first construction boom (2002-‐2008) driven by freehold ownership resulted in the development of infrastructure along the Sheikh Zayed Corridor. However, before this momentum could develop along the Mohammad Bin Zayed corridor, the real-‐estate market crashed, stalling major projects such as Dubai World Central, City of Arabia, and Dubai Industrial City,” he says.
However, the bulk of the construction in the pipeline over the next two decades is centred around Mohammad Bin Zayed Road; with Mohammad Bin Rashid City and Dubai World Central – including the New Al Maktoum International Airport – at its core.
“As Dubai gathers momentum, city-‐wide property prices are on an upward trajectory with a 15 per cent increase in home prices, and an 11 per cent increase in rents,” Lakhani, said.
“We believe that the overall rise in Dubai rents have resulted in migratory eﬀect, relocating people from the Sheikh Zayed Road to more aﬀordable areas on Mohammad Bin Zayed Road. We expect to see a higher-‐rate of home-‐ownership in these areas,” he said.
Dubai is also experiencing a price convergence between under-‐developed communities along the Mohammad Bin Zayed Road and the Sheikh Zayed Road, the research shows.
“Communities such as Dubai Sports City, Dubai Silicon Oasis, and Jumeriah Village will start to gain momentum as their infrastructure near completion thus converging with the more established communities, whilst prices in Jumeirah Golf Estates appeared to have overshot to the upside, relative to the infrastructure development. In the last rally of prices high-‐rise communities in the Mohammad bin Zayed Road Corridor have under performed by 40 per cent, insinuating an upside potential as their infrastructure ramps up,” Lakhani concluded.
Unitas Consultancy, a Dubai-based private equity, asset management and real estate asvisory firm, provides customised solutions for its clients that meet the twin objectives of wealth creation and capital preservation. Unitas offers its clients unparalleled experience in real estate asset
management/advisory/ private equity/ execution abilities.
Unitas Consultancy invests over a plethora of sectors: Facility Management, Food and Beverage, Real Estate, Trading and E-commerce. Towards this end Unitas has entered into Trading and Real Estate funds with a view to offer investors access to the rapidly growing market sectors in Dubai in a seamless and transparent manner.
The company plans to keep on diversifying its portfolio into other growing sectors of the economy. Unitas thrives on private sector finance and management with environmentally and socially responsive practices, to build up cash flows during the investment term and capital gains at exit.
Unitas invests equity in a 'buy, build and transfer' cycle with a 5-year term and yields current income as a function of operating cash flows, plus capital gains at exit. The guiding principle of Unitas is cash flow to investors and long-term benefits to communities and businesses.
Furthermore, it has made forays into the e-commerce and F&B sectors as well as facilities management with a view towards diversifying income streams.
For further information, please visit www.unitasconsultancy.com