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Over the last 10-12 months the UAE real estate market has demonstrated promising signs of recovery; albeit a selective revival with a focus on mega projects, high-end properties and prime locations. With some of the highest rental yields in the world ranging between 6% and 8% in most locations, and with some areas going as high as 9% and 11%, Dubai is particularly attractive to investments into the real estate sector. In addition, improved industry performance, heavy increase in infrastructure spending, political stability, favorable demographics and strong macro-economic indicators in the UAE, have raised overall confidence, with around 61.4% of real estate investments in 2012 originating from foreign nationals (primarily from India, Pakistan and the United Kingdom (UK)), 30% from GCC nationals, and 8.3% from non-GCC Arab nationals.

Abu Dhabi and Dubai, the two leading UAE real estate markets, are growing at different trajectories, propelled by fundamentally different drivers. While government and associated entities drive the growth process in Abu Dhabi, Dubai is driven mainly by domestic and international private investment and demand. A possible trend for Abu Dhabi in the coming year is increased consolidation of the fragmented markets leading to a balancing out of demand-supply bottlenecks in the region.

The UAE Government remains a key determinant of growth in the real estate

Table of Contents

State of Place  5
Investment Climate 5
Real Estate Sector Governance 7
Cautious Optimism 9
Infrastructure in the Spotlight 10
Differential Growth and Drivers 12
Greener Construction  13
Steady Growth Overall 15
Increased Growth and Investment Prospects 16
Overregulation 18
Country Profile  24
Macroeconomic Indicators  27
Real Estate Market  28
General Assumptions 36
Methodology for Forecasts of Mortgage Impact on GDP  36

List of Tables

Table 1: Key UAE Economic Indicators (Latest Available Data) 5
Table 2: The Global Competitiveness Index 2012-2013 6
Table 3: Global Real Estate Transparency Index 2012 6
Table 4: GCC Construction Contract Awards (million US$) 10
Table 5: Mortgage Cap Impact on GDP (million Dhs) 19
Table 6: Macro Prudential (LTV limits) And Fiscal Tools in Other Key Real Estate Markets 22
Table 7: Macroeconomic Indicators 27
Table 8: Origin of Real Estate Investment in Dubai 28
Table 9: Rental Yields in Dubai – Key Residential Properties 30
Table 10: UAE Real Estate Stock & Expected Short-Term Supply 31
Table 11: UAE Real Estate Supply Trends 31
Table 12: 2012 Building Activity in Dubai – Selected Indicators 32

List of Figures

Figure 1: Key Industry Growth & Constraint Factors 7
Figure 2: UAE New Hospitality and Retail Real Estate Supply 11
Figure 3: Dubai Property Investments by Origin-2012 12
Figure 4: Top Origins of Real Estate Investment in Dubai-2012 (m Dhs) 13
Figure 5: Number of Real Estate Investors in Dubai from Top Origin-2012 13
Figure 6: Premium Investors Scoring-2012 13
Figure 7: Rental Yield for Select Residential and Office Spaces: Dubai 16
Figure 8: UAE New Office and Residential Real Estate Supply 17
Figure 9: Impact of Proposed Mortgage Cap on GDP – Scenario 1 19
Figure 10: Impact of Proposed Mortgage Cap on GDP – Scenario 2 20
Figure 11: Impact of Proposed Mortgage Cap on GDP – Scenario 3 20
Figure 12: Key Construction Awards in 2012 (million US$) 29
Figure 13: Most Popular Property Products for Investment (4-month Trends) 29
Figure 14: Construction Materials Index 32
Figure 15: UAE Pipeline Projects 33
Figure 16: Value of UAE Construction Awards (bn US$) 33
Figure 17: UAE Current Construction Projects by Industry - Value (bn US$) 33
Figure 18: UAE Supply Trends 34
Figure 19: UAE Real Estate Stock & Expected Short-Term Supply 35

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