A collective sigh of relief could be heard around Dubai this week as residents awoke to find that the long-awaited property law had been issued, officially giving foreigners the right to own land in the emirate.
The Dubai Property Register Law grants all UAE and Gulf Cooperation Council (GCC) nationals the right to own freehold and 99-year leases on land in Dubai. Other foreigners are able to own property in designated areas.
"The law sets out the framework for freehold real estate ownership in Dubai. It confirms the right of UAE and GCC nationals to own property and makes provisions for foreigners to own real estate as well," says Mohammed al-Abbar, chairman of Emaar Properties.
Back in May 2002, Sheikh Mohammed bin Rashid, then crown prince of Dubai, decreed that foreigners would be able to own land, kicking off a frenzy of purchasing in the emirate, in which over 90% of the residents are foreigners.
Since then, many expatriates have lined up to buy - and then sell - property, sending Dubai's real estate market through the roof.
Three government heavyweights have also been crafting bigger and more luxurious projects catered exclusively to expatriates. Nakheel, behind the iconic Palm Islands, World and Waterfront offshore projects, has focused on getting high-profile wealthy buyers. After a number of delays Nakheel's Palm Jumeirah, its first mega project, is planning to be ready by this summer.
Meanwhile, Emaar Properties, one of the only developers to hand properties to owners, has already delivered over 10,000 units and has plans to complete more than 70,000 properties by 2008. At the same time, Dubai Properties, in charge of the 40-tower Jumeirah Beach Residence, will bring at least 40,000 of its own units into the market by the end of 2008.
Most of these yet-to-be-completed projects have already sold out. Estimates are that tens of thousands of these freehold properties were sold to eager investors, and that 13,000 units are already occupied.
All of this occurred despite the fact that the actual law was not on the books. These buyers were confident that the promise of the business-friendly Sheikh Mohammed would be enough to ignore the risk of not actually holding any deeds.
However, people did begin to get nervous as time went on. In 2005, assurances that the text of the legislation was complete and was just pending further review were often thrown around. Speculation that the law would be out by the end of 2005 turned out to be untrue, while promises from the government that it would emerge in February 2006 also went unfulfilled.
In a country known for its quick actions and ruthless efficiency, the delay in launching such an important piece of legislation became a source of some concern in the emirate.
With the law finally in place, experts predict that there might be another rush of interest from these more conservative investors who chose to sit on the sidelines until the law arrived.
The timing of the release of the law could not be better, as Dubai is reeling from a significant crash of the Dubai Financial Market (DFM). On Tuesday, the market shed nearly 12%, the largest single-day loss in years, seeing many major stocks hit 52-week lows.
That inauspicious day in March was the culmination of more than four months of steady decline that has seen the DFM lose 52% of its value after hitting an all-time high last November.
Emaar Properties, responsible for sometimes over 50% of the DFM's daily turnover, has been a main catalyst for the decline, as the real estate giant's shares have taken a consistent beating so far this year. The company's disappointing financial results released in January rattled investor confidence, which has not yet fully recovered.
So far there has been no official connection between the long-awaited release of the property law and the desire to help the flailing markets, but with the dominating presence of Emaar on the DFM, and the bull run of both the capital markets and the real estate sectors in 2005, the similarities are hard to ignore.
Property values have refused to go any direction but up since the 2002 decree was announced. In 2005, houses that were selling for $150,000 back in 2003 were easily able to pull in $300,000 or more. Rental values in 2005 averaged 40% hikes, with reports of people having to pay more than 70% to stay in their apartments or villas.
The stock market, like property, has been fingered for being overvalued for most of 2005. Local and regional markets enjoyed frightening price-to-earnings ratios that hovered around 60, while the DFM turned over more in one day in June 2005 than in the whole year of 2003.
Experts have quietly said that the issuing of the official property law should start another buying boom, in essence giving the government an ace up its sleeve if - and when - the market needs a little injection. The law could provide just that.
Fortunately, high oil prices, the major fundamental for both the property and the stock market, are still as strong as ever, meaning that there should not be any evaporation of liquidity around the region.
According to some analysts, the current suffering in the markets can be pinned on "panic selling" from investors - which is exactly the sort of ailment the arrival of a solid piece of property legislation might be able to mend.