In 2002, Dubai's ruler Maktoum Bin Rashid al Maktoum allowed foreigners to purchase property in Dubai. However, the law was not put into full effect until 2006. After this ruling, there was a huge increase in the number of developments as foreign investors entered the market. Real estate prices in Dubai sky-rocketed, and in some areas prices increased by as much as 70%.
The oversupply of luxury villas and apartments led to a housing market crash in 2008. Some properties lost almost 60% of their value, and many investors and foreigners fled the market. Additionally, many developers slowed or stopped their construction projects (although now by law developers must start construction on a property no more than six months after it has been sold).
Recently, there has been demand for smaller, cheaper properties in Dubai. This demand is expected to balance out the market. However, it is unclear how long this process will take.
Dubai's luxury scheme
Much of Dubai's success (and downfall) came because it marketed ultramodern luxury homes and apartments. Developments include flats in high-rise towers and private man-made islands. Dubai's most famous property, the Jumeirah Palm, is a real estate development in which properties are built on man-made peninsulas which form the shape of a gigantic palm tree. With such outlandish developments, you have to double-check that you are still in Dubai and not Las Vegas.
Property prices
In 2010, the average price per square metre in a villa was 11,000 AED. In expensive neighbourhoods, villas started at 5 million AED. In cheaper neighbourhoods, small villas cost as little as 500,000 AED.
A 70 square metre apartment in an expensive development can cost between 500,000 and 1,500,000 AED. In less expensive neighbourhoods (such as International City or Emirates Gardens), you can get a larger apartment for the same price.
Apartments that are 120 square metres usually cost over 1 million AED, and larger apartments or apartments in prime locations can cost between 2 and 5 million AED.
Real estate market predictions
Despite the problems that the Dubai housing market has had, analysts expect the Dubai property to yield profits in the future. However, you need to have enough funds to cover your mortgages payments, and you should be aware that property values can easily decrease in the short term.
As with any real estate purchase abroad, you should enter the market with caution. Consult a real estate professional before you decide to buy property in Dubai, and make sure to get some advice from independent sources as well.