Currently, 40 South African investors already own a piece of what’s widely regarded as one of the most ironic real estate developments worldwide: Palm Jumeirah, the man-made island in the shape of a date palm fanning out from the coast of Dubai. SA buyers, who joined the likes of British soccer star David Bechkham to buy one of the 4 000 villas and apartments in the first phase of the project when sales launched off plan back in 2002, have seen some staggering returns.

At the time, those 4 000 units sold out within 72 hours.
The larger, luxury villas were then pricedt at Dh4,6m (around R9,2m). Aaron Richardson, media relations manager for Palm Jumeirah developer Nakheel, says the last month two of those villas were resold for Dh45m (R90m) – a return of close to 1 000% within six years.

Richardson says Nakheel’s seen a particularly sharp rise in Palm Jumeirah property prices over the past 18 months as its ambitious plans to create one of the world’s biggest mixed-use resorts on man-made islands began to materialise.

The project is already 60% complete and regarded as an engineering feat, with land reclamation of this scale never attempted before. Palm Jumeirah has more than doubled Dubai’s existing beach area, adding another 78km of coastline to Dubai. And 24 of the 30 luxury hotels planned for Palm Jumeirah are already completed or nearing completion.

Nakheel, one of the biggest developers in the United Arab Emirates (UAE), with assets worth US$80bn (R616bn), has four more grandiose island projects on its drawing boards, which will add another 900km to Dubai’s coastline. Those include Palm Jebel Ali, Palm Deira, The World and The Universe.

Richardson says Palm Jumeirah was the first project offering overseas investors the opportunity to buy directly in Dubai’s real estate market. Nakheel was allowed to sell off plan from 2002, although formal legislation allowing overseas freehold ownership in Dubai only came into effect in 2006.

Palm Jumeirah has attracted buyers from as far a field as Chile to China and New York to Nepal. A larger chunk of sales have gone to buyers from the United Arab Emirates and other Gulf Estates. Some 25% of buyers are from Britain, Ireland and Germany and around 1% from SA. Nakheel will later this month launch another prime investment opportunity yon Palm Jumeirah when it joins forces with US real estate tycoon Donald Trump to launch Trump International Hotel & Tower. Richardson says a few of the 400 top-end apartments in the Trump development have already been sold pre-launch at close to Dh130 000/sq m (r 260 000/sq m).

But its not only Nakheel’s Palm projects that offer the super rich opportunity to buy properties. Investors will also soon be able to own an apartment in the world’s tallest man-made structure the Burj Dubai – when construction in the city’s old town is completed by September next year. The mixed-use tower, already more than 600m high, will boast an Armani hotel, another global first.

The 144 Armani Residences, designed by Italian fashion icon Giorgio Armani, will occupy seven levels of the Burj Dubai with a price tag of between Dh100 000/sq m (R 200 000/sq m) and DH 130 000/sq m (R 260 000/sg m).

Apartments are sized between 100sq m and 207sqm.

However, Dubai still offers plenty of property investment opportunities more on a par with SA price levels. A number of new residential high-rise towers are advertised in local newspapers from as little as Dh5 000/sq m (r10 000/sq m). But international real estate portal Global Property Guide places average property prices in Dubai at US$4 066/sq m (R 31 000/sq m).

Dubai property analysts dismiss talk of the city’s property market heading for oversupply. They argue that oil money has created much liquidity in the region, which has left Dubai’s real estate sector largely unaffected by the global credit crunch. Dubai’s rapidly expanding population – expected to jump from the current 1.5m to 4m by 2020 – is expected to keep a steady balance between demand and supply.

First published in Finweek 5 June 2008