DUBAI	1999	2005	2006	2007-9ADDITIONS
HOTELS	254	290	306	190
HOTEL APATS.	124	100	115	60
TOTAL	378	390	421	250

The demand for the accommodation has been increasing and along with that the prices of accommodation has also been increasing for the past 4 years. To meet this huge demand, large volume of construction is being carried out in Dubai in spite of the soaring real estate prices. To accommodate expected fifteen million visitors in the next five to seven years, the accommodation also has to double its present size. All major players are in the game and will they ever give it up after huge investment? The answer may be only positive, let us analyze and see.

Why should one pay a higher price in Dubai for either buying land or building? Most of the people living in Dubai for more than five years would have noticed the change that has taken place in the recent past in terms of resident population, tourists, infrastructure and facilities for people such as, parks, museums, amusement parks and the overall growth of business. Government has spent lots of money in the development of infrastructure during the past five years. The demand for this destination is increasing continuously for various reasons. These reasons could be liberalization of Government controls, mixing of cultures, increased business opportunities, congenial atmosphere, political stability in the region etc.

The demand for the hotels and hotel apartments are increasing steadily for the past four years. Most of the international hotel chains are at present in Dubai and some of them are expanding their facilities. Suddenly hotel business is becoming passion for the businessmen of Dubai. Many of the residential apartments have been converted to hotel apartment and those who wanted to construct residential houses have changed or modified their design of construction to hotels or hotel apartments. One may also come across buildings that are designated as hotel apartment are not custom made or suitable for hotel apartment.

Businessmen see money coming from hotel industry is good and also the demand for the hotel buildings, this has led to the increase of prices in real estate overall. Prices of both hotel building and residential building have more than doubled in the recent past. Today the price for residential accommodation is too far from the reach of a normal person who was living few years ago. Many expatriates have invested lot of money in the real estate market with the hope of getting good returns. This will happen only when the demand is sustained for long time to come.

There are hundreds of residential building in Dubai and Sharjah yet to be given for occupation. Most of these buildings are almost completed and will be ready for occupation within three to six months time. Some of these buildings are not open as these buildings do not have electricity or water connection, especially in Sharjah. There are some owners who have constructed the building and kept empty as the price offered by the clients are not to their expectations. In the meanwhile, brokers are confusing the landlords by offering to sell their building at a higher price rather than giving for lease. Some of the buildings are even kept for more than a year without giving for lease.

What will happen when these buildings are released for occupation? Will there be clients for these residential buildings? Will the supply be excessive of the demand? Will the price crash? How long the owner will keep the building empty? Will he be able to sustain paying the interest to the bank for long time? Will he be able to sustain loosing potential business for long time?

The answers could be:

1. Leisure market has to expand for the destination. This is possible only when various mega projects such as Dubai Land, Bawadi Hospitality etc. take shape when the leisure business will increase substantially. This will also increase all the related businesses and so the demand for accommodation will be sustained.
2. Today, the floating population is very high due to various projects in the region. This floating population comprises mainly of businessmen who come here on travel to do business and not to live here permanently. This will continue for another 6 to 7 years as there are projects lined up until 2015. Hence hotel and short term hotel apartment business will flourish for long time to come.
3. The resident expatriate population is also increasing due to the fast development taking place in Dubai. This increase is only at the lower end who cannot afford to take apartments at the prevailing prices either on rent or buy. Most of them are either leaving their families back home and working here and staying in the sharing accommodation or some of them have sent their families back due to the increased rental prices. There is some increase in the upper end segment who can take apartments at higher prices, but, this is not substantial. Hence one may expect long term rental price to get stabilized due to the oversupply in a year or two.
4. There could be shift in the place of living once the prices get stabilized in Dubai due to one of the main reason, Traffic. There will be major shift of people from Sharjah to Dubai once the prices get stabilized. This will help the real estate market in Dubai.

Considering the above and Dubai is fast growing, the real estate scene in Dubai may seem to be speculative. It is ultimately the person who is going to use the land or building is the one going to pay for the building from business generated. Now most of the real estate people are interested only in selling land and building not in leasing. The real estate brokers or agents are not interested in leasing as their share as commission in leasing is very little. They make big money as the hands change too often for the same property at present. Even before the building is fully constructed, the land and building has changed few hands. Each one has paid the premium to get the building. Who is going to pay this additional cost as the returns do not reflect reasonably well in parity with the investment?

The main reason for the soaring prices in real estate could be the over-exposed or speculated hotel business. The average room rate or the long term rent in the hotel or hotel apartment are very high compared to the other competitive destinations of Asia. People who come to Dubai for leisure or for shopping are paying higher prices for the stay. There is high demand for the hotel rooms or hotel apartment in Dubai may be due to the high quality of life, availability of nice international products, good life style and various on-going projects in the region. As Dubai is a market driven economy and hence the prices will get stabilized automatically soon. History speaks for itself and Dubai is a progressive society and has been progressing in all fields over the past many years.

This increase of price for both short term and long term accommodation will continue so long the demand for the destination is sustained. The demand for the short term apartment business or hotel business will continue until such time the projects are ongoing and the expatriates are engaged working in Dubai. This demand will continue as there are many projects on the pipeline and will continue for several more years to come. However, there could be a drop in long term stay prices as the supply is expected to increase once the buildings under construction are released both in Dubai and Sharjah.

Ultimately people are choosing Dubai for leisure or shopping or lifestyle or living is due to love for Dubai that takes care of people’s well being. Dubai is becoming a famous destination for the world at large. All those who can afford will definitely choose Dubai as their destination for leisure or business as Dubai has provided with lots of opportunities to all. So long the opportunities are there, Dubai will continue to grow and attract people to come to Dubai. Soaring real estate prices have to be looked in totality of businesses. Cause and effect are the basis of all economies. If demand for the hotel is the cause, one will see the effect of it in other related industries such as real estate as well. Once the cycle is completed then stabilization takes place. Some will loose and some will gain in business and thus justice to all. Do you want to invest in real estate – now or later – decide for yourself?