KEY POINTS:
It is the city that rose from the desert. Dubai - home to a third of all the world's cranes - has been undergoing a building boom for a decade.
Projects such as Palm Islands, The World Islands and the giant sail five star hotel know as Burj
Al Arab have captured the attention of the world's media, but until recently foreign investors had been excluded from 100 per cent ownership of any property in the country.
Now, with the creation of Business Bay, a city created within a city by the Dubai Government, 100 per cent foreign ownership is not only allowed but actively being sought out. And New Zealand is high on the target list of Dubai property developers looking for foreign investment.
The strength of the New Zealand dollar is making investing overseas an increasingly tempting exercise for many New Zealanders.
The population of Dubai is set to triple to three million over the next five years, with tourism expected to grow at a similar rate. The country has no corporate tax, no capital gains tax, no foreign exchange controls and no restrictions on capital repatriation. But just how safe is investing in the Dubai property market?
The question of whether the market is sustainable at its current rate of growth has to be asked.
Paul Dixon, in the investment sales team with real estate company Bayleys, has no such doubts: "Firstly, all future planning is controlled by the Government to ensure that demand and supply balance remains in desired rations to encourage growth and strong returns."
"Secondly, Dubai is facing a shortage of commercial office space. Although this has been acted upon in the form of new construction of high end office space, growth of the economy will continue to be sustained by a steady increase in employment."
According to EFG Hermes, current rental yields now average 27 per cent, a significant leap from the global average. This has been fuelled by the demand for commercial space. But Dubai is one of the world's largest building sites. By 2009 the margin between supply and demand will no longer be so favourable and rents are predicted to be back in line with global averages.
Could Dubai be just another place for speculators to get rich while the going is good, rather than a decent investment for the future?
"With 1281 new business licences issued in the first nine months of 2006 and net foreign direct investment increasing tenfold since 2000 to US$1.4 billion, there will continue to be demand for premium space." says Dixon.
It is certainly preferable to invest in one of the major property development companies in which the Government also has a stake. This will safeguard investments to a certain extent.
Any developer in Dubai must agree to put 50 per cent of the price of the unit in bond before he is allowed to sell that property. This ensures that even if the developer was to go bankrupt the Government would have sufficient funds in the bond to complete the project.
But it's not only property investors they are looking to acquire.
Any New Zealander purchasing property in the zones marked for foreign investment can be sponsored by the development company for residency in Dubai.
Meaning there may well be more to tie our two countries together than a certain boat race.
