A 37% annual growth rate in returns is what residential units in Dubai can look forward to in 2008 with the return for commercial and retail space in hot pursuit.

This was disclosed by the Egypt-based Prime Group in a report on the Dubai property market. According to the firm the higher returns were expected for all price brackets and that the prices which were prevailing at the moment were more moderate than what they have been like over the past few years.

This is how it translates into figures. Residential units with their 37% growth will yield returns reaching up to AED 2100 per square foot. Returns for commercial space will rise by 23% which translates to AED 3800 per square foot, while retail space would show a growth in returns of a modest 13% taking it to AED 5800 per square foot.

According to the report, average room rates would increase by a mere 12%, going up to AED1060.

The cause of this dynamism prevalent in the Dubai real estate sector can be traced to the Dubai Strategic Plan 2015.The plan emphasises the need for the development of a diversified economy and focuses on sectors such as real estate, construction and travel and tourism.

All three working in unison provide for a vibrant economy: the realty and construction sectors provide the basic infrastructure needed by all businesses to grow, while the tourism sectors ensures that the expansion doesn’t slacken by ensuring a constant stream of visitors (read potential investors) to Dubai.

According to the report, the current positive scenario on the residential side of the real estate sector is due to factors such as rapid population growth, higher take home incomes which make housing more affordable and improvement in laws regulating the sector.

The demand for residential units is expected to increase by 24,000 units in 2008 and go up to 27,000 by 2010. Meanwhile supply, with a built-in deficit of 40% in the form of delays in year to year rollouts, totals 375,000 units by 2010, with an incremental annual rollout touching 67,000 units by next year.

As a result of these demand-supply dynamics, the 39% shortage in the residential market seen in 2007 will be wiped out by the end of 2009, in fact a surplus of 31,000 residential units may be seen closer to 2010.

While predicting such positives, the report does send out a word to the wise by mentioning that the under supply scenario might continue beyond 2010.

Due to a lack of information regarding the availability of the necessary stock, the report has equally split the roll out between 2008 and 2010.