Residential units in Dubai will have the most attractive returns in 2008, with a 37 percent annual growth rate, followed by commercial and retail space, reveals new study.

The Egypt-based Prime Group, in its report on the Dubai property market, said that continued buoyancy is expected in prices across the board, but, on an average, these prices are more moderate than has been witnessed over the past few years.

In short, the residential units will yield the best returns this year, growing to Dh.2100 per square foot (37 percent growth), followed by commercial space at Dh.3800 per square foot (23 percent growth), and retail at Dh.5800 per square foot (13 percent growth). However, as far as the hospitality segment is concerned, the company expects average room rates to increase by 12 percent, touching Dh.1060, said the Prime Group in its report on the Dubai property sector.

The dynamics of the Dubai real estate sector is deeply rooted in the Dubai Strategic Plan 2015, which emphasizes on achieving a diversified economy in key growth areas, based on the priority sectors within the associated blue print.

The plan focuses on real estate development and construction sector, apart from travel and tourism, while the real estate sector provides necessary infrastructure for growth of all other businesses, and the tourism sector sustains the economic buoyancy through aggressive and continuous expansion in visitors to the emirate.

The present boom in the residential real estate sector is contributed by factors such as the high population growth, better salaries that makes housing more affordable and improvement in the real estate regulatory environments, says the report.

The increase in the annual demand of residential units for 2008 is 24000 units, which is likely to rise up to 27,000 units by the year 2010. On the other hand, the cumulative supply, presuming a 40 percent delay in the year-on-year rollouts for all projects till date, totals to 375,000 units by 2010, with an incremental annual rollout touching 67,000 units by next year.

The results of such a demand-supply pattern in the Dubai residential market is that, a 39 percent shortage in supply noticed in 2007, would revert to balanced levels by end of 2009. Also, a surplus of 31,000 residential units may be seen towards 2010. However, the report also contraindicates this by predicting that the extension of undersupply status may continue post 2010. With the little details available on when the necessary stock will reach the market, the report has presumed that the entire rollout will be equally split over the years 2008, 2009 and 2010. The report also states that a 40 percent delay is likely for arrival of residential units as per the cumulative supply estimate of 2.8square meters towards 2010.