A dream in the desert little more than 30 years ago, Dubai continues to pour money into developments that strain the boundaries of imagination as it rapidly turns an architectural vision into a concrete reality on the shores of the Arabian Gulf.

And, amazingly, despite the forest of strikingly angled skyscrapers springing up, Dubai's transformation from sand to stunning metropolis is only half complete.

Today, interspersed with spotless 'big box' retail outlets for Next, Debenhams and other British favourites, and mega projects such as the Ski Dubai complex, are the huge shells of half-completed residential complexes. Among these is the Burj Tower, which when completed in 2008 will be 800 metres high. Considering that the current tallest building in the world is the CFC 101 Tower in Taiwan at 508 metres, the scale of Dubai's ambition is plain to see.

Currently, though, Dubai is poised between construction and completion. The completed areas, with their manicured lawns, are populated with expatriate workers from around the world, attracted by generous tax-free financial packages and year-round sun – which nonetheless could burn the shirt off your back in the sweltering summer months.

Why buy in Dubai?
Currently, Dubai is home to one million predominately expatriate residents enjoying a mix of sun, sand and tax-free living.

However, the emirate is hoping to boost its population to two million by 2010 – again, largely by attracting businesses to its low tax commercial environment; these businesses will in turn employ international workers and swell the population, who will need somewhere to live.

Where and what to buy
Property in the emirate is generally concentrated along the Sheikh Zayed Road, which runs from Dubai Creek (where the older city is situated) to Abu Dhabi some 90 minutes away by car, but there are also 'off shore' developments where such infamous projects as the World are rising out of the turquoise shallows of the Gulf.

While some of these developments are aimed squarely at the continuing influx of foreign executives, the number of tourists visiting Dubai is expected to reach 15 million by 2010, hence there are opportunities for property owners to secure short-term rental agreements as well as the more typical long-term contracts. Certainly, the property available will suit almost every imagination. For example, one of the offshore developments is Palm Jumeirah, an immense man-made island consisting of 2,400 shoreline apartments and villas. Prices start from £215,000. (Note that all property prices quoted in this article were correct as of June 2006.)

Onshore, the Dubai Marina comprises 220 waterfront apartments situated around a marina. A studio costs from £71,778.

Emirates Hills will be a self-contained community with schools, communal pools and supermarkets on the Sheikh Zayed Road. Villas here start from £185,000.

Dubai Sports City will combine sports, lifestyle and commerce within the Dubailand project. A one-bedroom apartment in the Champions Tower will cost from £77,000.

Finally, Arabian Ranches is set around a golf course outside the city centre. Here, a five-bedroom villa costs from £450,000.

Investment potential
Although Dubai has been offering returns on well-chosen off plan developments of 30, 40 or even 50 per cent per annum, this astronomical level of return is not expected to continue. Instead, ten per cent per annum is a more realistic goal.

Certainly, Dubai's property market received two boosts in the first half of 2006, when new laws were announced enabling expats to own property freehold in designated areas, and Barclays Bank launched a range of mortgages.

Like any property market, Dubai offers both good and not-so-good developments, so prospective buy-to-let purchasers would be well advised to pick their developments carefully, taking into account the adequacy of the infrastructure, the quality of neighbouring buildings and close proximity to big employers and schools. Choosing wisely should also safeguard against Dubai's population growth falling short of the projections, which may result in vacant properties.

So while Dubai could now be considered to have emerged onto the international property market, you really ain't seen nothing yet.

How to buy
Up until Spring 2006 it was only possible for foreign investors to buy leasehold property, but not land or freehold property, in Dubai. However, thanks to reforms by the Dubai government, foreigners can now buy property in Dubai without the fear that at some point in the future the property will no longer be theirs.

1. With Dubai only half way to turning vision into reality, unsurprisingly the majority of property available is off-plan, which the buyer reserves for 48 hours or so with a nominal fee of approximately £1,500 and then secures the property within this timeframe via a deposit. Typically, the deposit is 10 per cent of the asking price, but some variation is evident with 5 and 15 per cent also fairly common figures. When the deposit is received a purchase contract is drawn up by the developer.

2. A series of stage payments throughout the build process follows the deposit, with the final payment usually expected upon completion of the property. Note that each developer typically follows a different structure and may even offer some degree of flexibility in this respect.

3. If you keep the property until completion, a land registration fee of 1.5 per cent of the purchase price might be payable. If, however, you sell the property before completion, the developer may charge an administration fee.

4. If you are buying a resale property, you will be required to pay a holding deposit, then the balance once the funds are in place. Mortgages are available both from the UK and within Dubai, although interest rates are not especially attractive.

Dubai factfile:
Timezone: GMT+4
Exchange rate: GBP1=AED6.7805 (HiFX July06)
Mortgage availability: Moderate
Deposit required: 5–15% for off-plan purchases
Agent's fees: 2–5% legal fees: 1–2%
Capital gains tax: No
Peak letting season: Most new property in Dubai is residential, so long-term lets are the norm
Average daily temps celcius (Jan–Dec):
19, 20, 22, 26, 30, 32, 35, 35, 32, 29, 25, 20, 27
Average property prices: 1-bed apart: £120,000; 2-bed apart: £180,000; 3-bed villa: £270,000

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Article published in August 2006