Transcript Dubai - SlideBoom

Dubai, a Pearl Created by Visionaries
The Rulers of Dubai
 The last three rulers of Dubai have made of Dubai the city they
could only dream of. The New York of the Middle East is taking
shape and creating growth opportunities in real estate as well as
other supporting industries
Qatar
Dubai Vision
 Dubai’s visionary leader is determined to make of Dubai a worldclass city in the economic, financial and tourism fronts. In less
than 5 years a series of regulations have been introduced that have
attracted investments, companies and top professionals from all
over the world. The ruler has made Dubai the Middle East’s main
economic hub
 Dubai has been one of the fastest growing economies in the world
in the last few years. In Dubai’s “Vision 2015” (released earlier this
year), Dubai is to become a “Global City” with a projected GDP
growth of approximately 11% to reach AED 397 billion (US$108
billion) up from US$ 37 billion in 2005
 The vision calls for diversifying income sources to become less
reliant on oil while focusing increasingly on tourism, retail,
construction and manufacturing
Dubai
UAE
Saudi Arabia
Oman
 Situated along the south-eastern tip of the Arabian
peninsula. Qatar lies to the north-west, Saudi
Arabia to the west, south and south-east, and Oman
to the south-east and north-east
 The UAE are a Constitutional Federation of seven
emirates: Abu Dhabi, Dubai, Sharjah, Ajman, Umm
Al Qaiwain, Ras al Khaimah and Fujairah
 Occupying an area of about 83,600 sq. km (32,400
sq. miles) – roughly the size of Portugal. The
coastline of the UAE was approximately 1,318 km
but land reclamation projects are extending this
figure
 Dubai's strategic location midway between Europe
and Asia, makes for easy accessibility. London is
seven hours away by air, Frankfurt six, Cairo four
and Hong Kong eight
The UAE Economy – World Comparison
2007 GDP Growth
Source: CIA World Factbook, 2008
 UAE has had a real GDP growth of 8-9% in the last years, in
line with other Asian tigers like China or India
 It is expected that the GDP real growth rate in the following 2
years will be approx. 6-8% (even though the government
plans are to grow at a rate of 11%)
2007 GDP/capita (USD)
Source: CIA World Factbook, 2008
 The UAE GDP per capita is the seventh in the world,
above global powerful countries such as the US and
Germany
 It doubles the EU average and it is 5 times the world
average
The UAE Economy – Diversification
GDP Breakdown by Industry, 2007
 Despite the recent successful diversification of some
emirates, the oil and gas sector still represents a 27%
of UAE’s nominal GDP and still is a critical
component of the country’s growth
Public Sector
 However, the non-oil sector has benefited from the
extremely high oil prices which is subsidising the
growing government budget, source of many of the
country’s initiatives. Additionally, it has fuelled the
development of the construction, real estate, financial
and tourism industries
100%
6%
8%
90%
80%
Services Sector
38%
70%
60%
74%
50%
Industrial Sector
22%
40%
30%
20%
13%
10%
0%
1%
5%
Dubai
Oil and Gas
27%
1%
2%
3%
Water and Electricity
Agriculture
UAE
(1)
 Dubai government has the first-mover advantage. The
other emirates, however, are also diversifying their
economies, liberalising their social and economic
policies and providing incentive to both local and
foreign companies to invest and contribute to the
UAE growth
 The government efforts have started to pay off,
making the UAE a regional economic, trading,
financial and tourism hub
 The UAE continues to attract significant flows of
foreign direct investments (FDI) and expatriate labour
Source: Dubai Strategic Plan 2015, Dubai Ministry of Economy
(1) Includes trading, construction, transport, communications, real estate,
hospitality and social and personal services
The UAE Population – Growth
Population Growth by City, 2001-2010E
Abu Dhabi
Dubai
 Dubai and Abu Dhabi populations
have grown 7-8% annually. Such
growth is expected to increase in
the coming years
(‘000)
7.9%
3,000
7.5%
7%
(Annual Growth)
8%
(Annual Growth)
2,500
+421K
2,000
+463K
1,500
 This huge rise in population is due
to the expatriate community influx
in the UAE
 In Abu Dhabi 78% of the
population are expatriates,
whereas in Dubai the percentage
goes above 85% approximately
 Dubai has a young population
pyramid: 63% is in the 20-40 age
bracket. It is precisely the
population in this bracket that
tends to be willing to acquire their
own apartment/villa
1,000
500
0
2001
2002
Source: EFG-Hermes
2003
2004
2005
2006
2007
2008E 2009E 2010E
Regional HQs – Dubai Ranks 4th
Multinational Regional Headquarters
Number of Regional HQ set up in 2005
Main Specialised Business Cities in Dubai
Dubai Internet City
 Hosts some of the world’s most prominent ICT-related
companies (Microsoft, Cisco, Dell, Siemens, Oracle, HP,
VISA, IBM, Intel, SUN, Sony Ericsson, Samsung)
Dubai International
Financial Centre
 DIFC is the world's fastest growing int’l financial centre and
accommodates major financial institutions (Merrill Lynch,
MSDW, Goldman Sachs, Barclays, Credit Suisse, Deutsche
Bank)
Jebel Ali Free Zone
 Drives industrial and trade development and ranks among
the world’s largest and fastest growing free zones. Has
attracted +6,000 companies with a diverse industrial mix
Dubai Media City
 DMC is the only global media and TV hub in the region
where all media-related businesses thrive together (CNN,
BBC, CNBC, Reuters, MBC, Showtime, Associated Press,
Sony)
% of total
United
States
80
United
Kingdom
64
China
38
36
UAE
India
Rest of
Middle East
7
3
14%
11%
7%
5%
Knowledge Village
 Education industry specialisation, has attracted international
educational institutions from Australia, Belgium, Canada,
France, India, Ireland Pakistan, Russia, UK, etc. (e.g.,
INSEAD campus, Sorbonne campus)
Dubai
Healthcare City
 Healthcare community offers specialised medical treatment,
leading prevention and rehabilitation, research and
healthcare services
Dubai Maritime City
 DMC is the world's first purpose-built maritime centre and is
creating an environment for the networking and integration
of maritime industry players from all over the globe
1%
0.5%
Source: Landmark Real Estate Investment Management, 2006
Many companies have already set up their regional headquarters in Dubai. A set of specialised cities are currently hosting
the majority of the Fortune 500 companies in the world
Dubai Ports – Rank 9th, and 3rd re-export hub
Dubai Ports Evolution, 2001-2006
Top-10 International Ports, 2006
Container traffic, thousands of TEUs
Container traffic, thousands of TEUs
Annual Growth
22%
Source: Dubai Ports Authority, 2008
Source: American Association of Port Authorities (AAPA) World Port
Rankings, 2008
With an average annual growth of +20%, Dubai has emerged as one of the new leading container ports of the world,
achieving the 9th position in overall traffic and the 3rd as a re-export hub. Moreover, Dubai's ports are expanding their
cargo-handling capacity further to be able to handle 22 million containers a year by 2020
UAE Tourism Industry – Dubai Airport Ranks 7th
International Passenger Traffic, 2007
Million passengers
 The robust performance of the UAE tourism and
travel sector has had a positive impact on the
demand for real estate in two ways:
 Directly: As consistent increases in tourist
arrivals result in greater demand for hotels
and furnished apartments
 Indirectly: Through the creation of jobs,
which encourages the influx of expatriates
and eventually leads to increased demand
for quality housing
 6.5 million tourists arrived in Dubai in 2007. The
current governmental target for tourism includes
receiving 15 million tourists by the end of the
decade (which would represent a CAGR of 23%)
Source: Airports Council International, 2008
 Dubai International Airport had the highest growth rate (20%) in the world in
2007. It has grown at an average of 15% annually since 2002 and constitutes
27% of total Middle East traffic
 The Emirate forecasts 40 M passengers in 2008 and 60 M by 2010. To achieve
this growth, Dubai World Central, the largest airport in the world, is under
construction in the Jebel Ali area. The total capacity will be 120 M passengers
annually
 Hotel revenues have increased from approx.
AED 1.8 billion in 1996 to AED 10.8 billion in
2006 (CAGR of 20 %.), and the average
occupancy rate in Dubai reached 87%
Source: BBC, Department of Tourism and Commerce Marketing
Financial Hub in the Middle East
Top International Financial Centres, 2008

Global Financial Centres Index (GFCI) measuring overall competitiveness
Ranking
Despite the fact that Dubai Financial Centre is still in
its early stages it already ranks among world's top25 financial centres
2
 Being the leading financial centre in the region
(followed by Bahrain and Qatar ranked 39th
and 47th respectively)
3
 The 4th most competitive in Asia
1
4

Dubai's position is a sign of growing importance of
the Gulf as a whole on the global financial stage,
thanks in part to high oil prices and large
government investment

The Dubai International Financial Centre (DIFC) was
set up by the government in 2004 to make of the
Emirate a financial services hub
5
6
7
8
9
10
24
39
42
47
Source: The Global Financial Centres Index, City of London Corporation, March 2008
 Has attracted more than 500 companies
including top foreign financial institutions
 It serves the region with the largest untapped
emerging market for financial services
 It is strategically located to bridge the gap
between existing financial centres in London
and NY in the West, and Hong Kong and Tokyo
in the East
UAE Retail Industry – Ranks 8th in the World
Top-15 International Retail Markets, 2008

UAE ranks 8th among the Top-15 Most
International Retail Markets with 41% of
international retailers present in UAE

Retail in the UAE has changed beyond
recognition in recent years
Proportion of international retailers trading, %
UK
55%
Spain
51%
France
Germany
Italy
Switzerland
Austria
UAE
China
Russia
US
Netherlands
Singapore
Belgium
Ireland
 The Dubai Mall, world’s biggest shopping
mall will open in 2009
49%
47%
 Emergence of some of the most high-profile
retail developments in the world (e.g. Dubai
Mall, Marina Mall, Ibn Battuta, etc.)
45%
42%
42%
 Creation of successful shopping events to
attract regional buyers (e.g. Dubai Shopping
Festival)
41%
40%
39%
39%
39%
38%
37%
35%
Source: How Global is the Business of Retail, CBRE, 2008
(the study mapped the global footprint of 250 of the world’s top retailers)

International retailers are looking to the world’s
emerging markets to drive the success of their
businesses
 40% of top retailers expect emerging
markets to provide their source of growth
over the next 5 years, while only 25% expect
to see growth concentrated in their home
markets
Dubai – How was the miracle possible?
Oil revenues, which have doubled
in the recent years and the
economy growth have allowed
Dubai to generate funds to invest
in…
Economic and political measures to
open the UAE as a key
differentiator to the rest of
countries within the Middle East…
Dubai's geographically strategic
location has been key for its growth
because…
 Infrastructure both for business and its residents: specialised cities (e.g.
Internet City, Media City, HealthCare City, DIFC, etc.), top-class health and
education system, road and air transport networks, etc.
 Real estate megaprojects (e.g. The Palms, Burj Dubai, Dubai Land, etc.) to
absorb the housing demand of the expatriate population and the hotel demand
of its growing tourism industry
 To attract investment and entrepreneurs: free zones, tax free investments,
amongst others
 To attract human capital: attractive tax-free salary packages, tolerance towards
different cultures and high level of security
 It serves as the main hub midway between Asian, European and African
markets. This factor makes it especially attractive both for regional and global
companies
 Political and social stability, in comparison with neighbouring countries, which
has attracted most of the funds in the region
 Attracts a low-cost labour force from neighbouring countries (such as India,
Pakistan or Bangladesh, amongst others )
The Residential Real Estate Market – Rental Yield
Dubai Cap Rate(1) vs. other regions, 2007
 The current UAE Cap Rate
commands a +4/5% premium
over other world markets …
9.5%
10%
9%
8%
6.5%
7%
6%
5.0%
5.5%
5.4%
 Given its low risk free rate, it is
expected that the Cap Rate of
UAE will go down in the coming
years…
4.5%
5%
4%
3%
2%
1%
0%
World
North
Africa
Europe
Asia
 … which implies that investors in
the UAE expect a higher return
rate than in other markets
Dubai
Today
Dubai
Future
Source: Damac, 2008
(1) The Cap Rate Model is used to estimate the value of income producing properties. That is, the Cap Rate
is the net operating income (NOI) from a property (adjusted for vacancy rate and operating expenses)
divided by the selling price of the property
 …however, given the expected
high inflation rate, rental income
should increase, and therefore
the UAE real estate market still
has room to grow and appreciate
The Residential Real Estate Market – Future
Residential Market: Supply vs. Demand
(‘000) units
Demand
Price/ feet2
Supply
250
14,000
220
200
190
175
140
150
50
3
125
Tokyo
8,000
60
10
12,000
Moscow
New York
Singapore
Amsterdam
Hong Kong
Paris
Rome
Barcelona
6,000
75
35
London
10,000
100
100
International Benchmark
Shanghai
Prague
Kiev
Budapest
Bangkok Warsaw
Cairo
4,000
25
2,000
0
Dubai
Abu Dhabi
0
2005
2006
2007
2008E
2009E
2010E
0
10
20
30
40
50
GDP per capita, ‘000 USD
Source: Colliers International, HSBC
Source: HSBC, Jones Lang LaSalle, Richard Ellis, PWC
 The widely anticipated oversupply in Dubai has yet to
materialise. Deliveries continue to be pushed back and
scaled down. Based on the latest estimates, the market in
Dubai will remain undersupplied until 2011 at least
 In comparison to major cities worldwide, on a
relative basis, given the amount of wealth in
Dubai, prices are still low
60
Mortgage Financing Market – Evolution
Mortgage financing is a critical part of the growth of any property market. In the UAE, although
the market is experiencing unprecedented growth, it is still in its infancy
Mortgage
Players
Developers
Accepted
Financing
Approval
Maximum
Loan
Term
(years)
2003
Only HSBC
and Amlak
Only EMAAR,
Nakheel
Based on original
price
75%
15
2008
At least 16
lenders
Private
developers
Based on market
price
90%
20-25
Home finance market, AED billion
20
 The expected mortgage
financing market in 2007
(AED 20 bn) represents only
a 1% of the total value of
announced projects in the
UAE (AED 1.7 trillion)
Total mortgage value to GDP
47.0%
 The entry of international
financial services firms will
contribute to the reduction in
spreads
12
8
8.1%
3.4%
2005
2006
1.2%
1.4%
2.4%
3.4%
 Moreover, the high spread
applied to local mortgage
loans (3-5%) makes us
believe that the mortgage
rates currently at 8% should
decline
2007
% total banking assets
% total M2 liquidity
Developed
Economies
Emerging
Markets
UAE (2006)
Note: Emerging markets include Malaysia, Estonia, Thailand, Chile, Latvia,
Colombia, China, Mexico, Jordan, Croatia, Bolivia, Hungary, Morocco, Tunisia,
Czech Rp, India, Poland, Slovakia, Slovenia, Bangladesh, Iran, Peru, Algeria,
Saudi Arabia, Pakistan and Ghana
Source: OECD, IFC, Shuaa Capital
 In line with the spread
reduction, the target market
will increase and demand
increases will reinforce the
current real estate boom
Interest Rate – Evolution
Interest/ Inflation Rate Evolution, 2002-2011
UAE Inflation
Average mortgage rate
12%
Negative real interest rate
10.0%
10%
8.0%
8%
6.0%
6%
4%
Positive real interest rate
2%
2002
2003
2004
2005
2006
2007
2008E 2009E 2010E 2011E
 A surge in domestic demand
has generated price
pressures, particularly in real
estate and energy, as well as
in services such as
education and healthcare
 Capital appreciation due to a
rate of inflation of 10% would
be more than enough to
offset a mortgage payment
borrowed at a rate of 8%.
The investor would be left
with 2% of the property value
as a net return
 In spite of a future reduction
of the inflation rate, the real
leverage cost will continue to
be very low at 1-2% levels
Source: IMF (International Monetary Fund), 2008
Note: a negative real interest rate occurs when the rate of inflation exceeds the cost of borrowing (mortgage
rate). The cost to
the buyer of financing the purchase of real estate becomes negligible because capital appreciation (which is caused by the
high rate of inflation) offsets the mortgage payments which are calculated
at the lower mortgage rate. Although negative rates
are unsustainable in the long run, they can exist for several years if the market is not mature
Regulation – Guarantees to Investors
After an initial growth period without a sophisticated regulation, the Government of Dubai has
launched several initiatives to regulate the real estate sector to provide additional guarantees to local
and foreign investors and to further boost the development industry
Brokers Law
Main Features
Benefits
Escrow Law
RERA
(1)
 All brokers must be registered
with the Land Department
 Training and certification to be
enforced
 Developers to deposit off-plan
sales funds into a guaranteed
account
 Funds to be released in line
with % of completed
construction
 Responsible for overseeing
operations of developers,
brokers, financers, etc.
 Institute rent caps
 Provide information on the
property market
 Will help to weed out untrained,
unqualified brokers
 Buyers can be assured that
they are dealing with licensed
and certified professionals
 Ensure that buyer funds are
being utilised for specific project
 With 10% of funds being held for
1 year, ensures defects at
handover are repaired
 Provide incentive to developers
not to fall behind schedule
 Unify and regulate all propertyrelated activities
 Act as a forum for disputes
 Encourage the adoption of
international best practices
 Develop mechanisms to deal
with unfair practices
(1) Real Estate Regulatory Agency, established in 2007
These initiatives and others being undertaken by the government are allowing Dubai to move towards
incorporating international best practices and legal standards, helping to put both domestic and foreign
buyers more at ease.