The Hottest Housing Market You Likely Know Nothing About
BY WENDY COLE
The booming U.S. real estate market seemed to reverse course pretty much the second I joined REALTOR® Magazine as a senior editor last June. I’m pretty sure I didn’t cause the subprime mortgage meltdown, but my timing still felt a tad inauspicious. I soon came to understand that real estate practitioners would have to work harder and smarter to differentiate themselves from the crowd, and these tougher times have bolstered my commitment to produce timely and helpful information.
Out of the blue in early November, I received an e-mail invitation to hop on a plane from Chicago to check out an extremely robust, fast-appreciating real estate opportunity. No, it wasn’t in Seattle, Salt Lake City, or Charlotte, N.C., where housing sales have remained relentlessly strong. It’s considerably further off the beaten path, and one of those places that can sound to good too be true until you land there.
With the blessing of my bosses, just after Thanksgiving I was off to Dubai.
Morning fog engulfs a thicket of skyscrapers in various stages of completion as we descend toward Dubai International airport in the northern reaches of the United Arab Emirates (U.A.E.). It’s more than 15 hours since we left New York’s JFK on Virgin Atlantic (including an expeditious changeover in London) en route to the U.A.E., a cluster of seven city-states along the Persian Gulf that defy nearly all the stereotypes about the Middle East.
The vision of Sheik Mohammed bin Rashid al-Maktoum, Dubai’s ruler, seems as focused on attracting worldwide attention as investor capital — and both goals seem well on their way to fruition. The evidence: The arid sheikdom (pop. 1.5 million and zooming) is home to one of the world’s largest indoor ski slopes, a man-made island shaped like a palm tree that will one day house 40,000 residents, and a 56-story, $2,200-a-night hotel built like a billowing sail. The glass and steel Burj Dubai tower in the financial center, promoted as the world’s tallest building, is rising from the earth at a rate of one floor every three days.
Nahkeel, the giant Dubai developer that invited our group of five U.S. journalists to tour their enigmatic land, is eagerly trying to spread the word on Dubai to Americans. It’s nearly rain-free climate, exquisite beaches and temperatures ranging from balmy to sweltering make it an ideal
getaway for those tired of the Caribbean — and a little extra time on their hands to make the trek. Dubai already has some 250 hotels, but with occupancy typically exceeding 90 percent, dozens more are sprouting from the desert each year to meet the growing demand.
Yet residential real estate is what city planners and developers are banking on to drive the area’s economic engine. Nakheel alone will be creating housing for another three million residents over the next 20 years (16 enormous multi-use projects are already in the pipeline). The vast majority of those will be sold to non-natives: Europeans and Asians whose primary homes are within a few hours flight time and are plunking down deposits on new homes as fast as developers can announce the plans.
Prices range from the supremely affordable (under $200,000 for a well-appointed one bedroom apartment) to sky’s-the-limit multi-million dollar Arabian-style mansions.
Annual appreciation rates have surpassed 100 percent for many properties since the building boom began about five years ago, and show no measurable signs of slowing down.
One factor that should help keep the market from tumbling (even when the inevitable correction does set in): Buyers here aren’t being enticed by complicated, exotic mortgages that could lead them into trouble. While cash deals were predominate during the initial buying spree a few years back, plain vanilla, fixed-rate financing now rules in this part of the world.
Even if you have no intention of ever traveling to or investing in the U.A.E., it’s worth noting that Dubai Inc. may already be operating in your back yard. In 2006, Dubai-based Emaar Properties bought California-based John Laing Homes, one of America’s residential builders. The all-cash $1.2 billion dollar transaction was the most expensive purchase ever of a private home builder. Even with the U.S. housing downturn, Emaar officials insist they made a great long-term investment.
You can read a fuller dispatch from my trip to Dubai in the February issue of REALTOR® magazine.
Who’s speaking of real estate? A better question might be, who’s not? For years, it seemed as if people all over the country were swapping stories about getting priced out of their own neighborhood. Today, the real estate talk is more likely to be about troubled markets and unease over the subprime lending mess.
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