Cinnovation Group, a Singapore-based company, completed a deal to purchased Nova Island, a portion of Nakheel's The World. The World is a project consisting of man made islands just off the shore of Dubai. Cinnovation also announced that they plan on building a $200 million development consisting of a resort and spa on the island.
Critics point to deals such as this as a major reason why the supply of low cost housing has dwindled over the last decade within the United Arab Emirates (UAE) and specifically Dubai. Recently there has been growing interest by developers who are entering this segment of housing.
The Cinnovation development is not alone in scope or size for the region. The director of the firms Dubai operations, Varun Chaudhary stated last Monday that the development is projected to be a private retreat, providing both tourist and residential offerings. The island’s purchase price has not been revealed at this time.
With many luxury developments completed and more on the way, residential property prices across the region have increased dramatically. Fuelled by both growing demand and short supply, compounded by substantial percentage of the supply not compatible with the demand profile, relief does not seem to be coming any time soon.
The average property price in Dubai alone increased by roughly 17% in the past year and is forecasted to continue rising. With an expected population growth of seven percent per year, Dubai’s population will double to approximately two million by the year 2010. Despite a seemingly obvious need and the existence of this low-cost housing market, developers continue their hesitation in regards to building, particularly in the face of rising construction costs on top of the increasing land prices.
As an alternative to Dubai, more developers have chosen to build in Ajman where property prices are still relatively low and affordable housing projects aimed at the low to middle classes are realistically viable.
