Dubai Property Prices To Fall Another 10%

Image by buckofive via FlickrReal estate prices in Dubai, already nearly 60 percent from their peak, are set to fall another 10 percent over the next two years, as new devices are released in a market flooded with offers, according a Reuters poll.

A Dubai real estate boom collapsed in late 2008 when he was beaten by the global financial crisis and debt crisis of the Persian Gulf state is.

Housing prices in the state of the Persian Gulf, home of the tallest building in the world, which has 900 homes plunged 58 percent from their peak in the fourth quarter of 2008, according to the median estimate of 15 banks, firms investment and research institutions.

Prices in Dubai and Abu Dhabi fell five percent and 10 percent respectively in 2011, according to the survey, which was taken last week.

The decline continued in 2012 with prices of 4 per cent in Dubai and Abu Dhabi 4 percent, according to the median forecast.

Abu Dhabi, United Arab Emirates and home to most of its oil, weathered the financial crisis better than Dubai, but now faces an oversupply of goods. Prices have already fallen by 45 percent.

In the latest sign of the housing market is in trouble, Abu Dhabi government has intervened with an aid package of $ 5.2 billion for the state's largest developer Aldar Properties will help the company meet looming debt obligations.

Analysts do not see the Dubai real estate market bottom out until the second half of this year, as soon as possible.

Rents in Abu Dhabi is to reduce by 13 percent in 2011 and 5 percent in 2012, according to a median forecast of 12 analysts.

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Dubai Holding Unit Delays Repayment of $555 Million Loan for Second Time

Dubai Holding Commercial Operations Group LLC, a real estate and hospitality group owned by the emirate’s ruler, said it received an extension on a $555 million revolving credit line until Nov. 30.

All lenders to Dubai Holding Commercial agreed to extend the facility, the company said in a statement to Nasdaq Dubai today. The facility is extended under “commercial terms,” it said.

Dubai Holding Commercial in July received a two-month extension on the loan at “commercial terms,” the company said then.

Source: Bloomberg

More gloom for Dubai real estate market as second property index shows price falls in second quarter

The oversupply of residential property in Dubai is predicted to peak in 2012 with vacancies of between 25 and 28%, according to the latest real estate report by Landmark Advisory.
At the same time distressed sales are leading to accelerates price declines, according to the Dubai and Abu Dhabi Real Estate Report for the third quarter of 2010 from the consultancy.

‘As prices are falling faster than rents, this is pushing up yields,’ said Jesse Downs, director of research and advisory services at Landmark Advisory.

‘This is positive for the market as higher yields are required to attract investors wary of the weak market fundamentals and perceived downside risk. At the moment, financing remains limited, which means investors continue to dictate market trends,’ she explained.

The report found that sale volumes slowed in the second quarter, compared to the first. Prices for villas dropped by 5% and apartments fell by 5.8% as a result of limited buyers and tighter lending restrictions.

In neighbouring Abu Dhabi quality issues could lead to a rapid reshuffling of the market as the new higher quality supply is delivered, the report also points out. Downs expects only 20% of high end properties in the pipeline will meet the standard, which will have a knock on effect on prices for mid-range homes.

‘However, we predict that this trend will be temporary, with performance weakening and not recovering once the truly high end developments are delivered,’ she added.

In Dubai and Abu Dhabi rental costs declined across the board with Dubai villas down 4.4% and apartments down 5.8% during the quarter. Abu Dhabi rents dropped by 11%, a sharp decline compared with 3% in the first quarter of the year.

‘These declines are supply driven following new on-island deliveries such as Khalidiyah Palace, Al Aryam Tower, Silver and Wave Tower. Static sales prices and declining rents have resulted in further yields compression, currently at 5.1%, and we anticipate that yields will continue to compress in the short term,’ Downs explained.

The figures confirm those released by consultants Colliers International earlier this month which showed house prices fell by 4% in the second quarter of the year compared with an increase of 2% in the first three months of 2010.

The consultancy is predicting that around 33,000 new units will be released onto the market by the end of the year, less than its original estimate of 41,000 due to project delays or rescheduling.

‘There are already more than 340,000 residential properties in Dubai with an average occupancy rate of 87%, with further declines anticipated,’ said Colliers International’s regional director, Ian Albert.

‘The market simply cannot absorb the additional supply unless the population grows and/or the release of stock is slowed down,’ he added.

Albert also warned that a dramatic drop in rents made home ownership a less attractive option for investors in terms of income generation, another factor that was weakening demand.

Dubai Property Owners Now in Control of their Units

Dubai property owners can now play an active role in management and operation of their towers and communities as per the new regulations which provide the framework for the ‘Dubai Jointly Owned Property Law,’ said an industry expert.

The guidelines, implementing ‘Dubai Jointly Owned Property Law' Law No. 27 gives home owner associations control over who maintains their units, choses service levels and costs and also the much-disputed service fees.

The new ‘Dubai Jointly Owned Property Law' paves way for the legal establishment of home owners associations, said Nicole Betts, head of Association Management, at Dubai-based Asteco Property Management.

“Now that the much anticipated and long awaited regulations are effective, the dawn of a new era in the Dubai property market is upon us. This legislation will bring much need transparency, guidelines and real estate regulatory authority (Rera) directive to the emerging industry of association management. It is good for the market,” she noted.

According to Betts, the idea of home owner associations managing service levels and controlling service fees transparently was ‘good for the market.’

"Until now the way in which jointly owned freehold property has been operated has not been regulated, it has been left up to the developer to provide property management services or outsource them to facility management companies and service charges have been calculated and collected by developers," she pointed out.

“These methods of operation have been widely detrimental resulting in a poor level or lack of services such as cleaning, security, pest control and maintenance of the buildings facilities and an inaccurate representation of service charges to the market due a multitude of factors,” the expert added.

As with any new regulation, Betts said there is a period of adjustment and property owners, developers and service providers will no doubt "face challenging times ahead for as full understanding of the regulations and their implementation becomes understood."

“The effect on the property industry will ultimately be a positive one, providing much needed transparency and disclosure on the operating costs for projects as well as project specifications and contractual arrangements,” she added.

Asteco Property Management manages several informal owners associations in Dubai and its association management team recently attended the Rera ‘Owners’ Association Management Program’ at the Dubai Real Estate Institute.

“We intend to be one of the first organisations to be licensed by Rera to manage owners’ associations as well as providing both developers and property owners with professional consultancy services to assist them with the compliance and transition of their developments,” Betts noted.

According to her, these new regulations will certainly reassure overseas investors. "Transparency is essential especially for foreign owners and to now have an owners association to help protect their interests will certainly boost confidence in the Dubai market."

"Historically, on occasions, there have been challenges in collecting service charges from owners, some refusing to pay believing that they were not legally obliged to do so," she explained.

The regulations will bring much needed legal support which will ultimately enable the owners association to file a lien (security interest) over a unit where the owner refuses to pay their service charge obligations.

“In the current economic climate, investors more now than ever need their properties to earn their keep, providing a continuous income stream and optimal return on investment. A well presented and managed building always initially attracts a better quality of tenant and most importantly retains them longer,” Betts added. TradeArabia News Service

Aramani Hotel Dubai Opening Delayed

The opening of the first hotel designed by Giorgio Armani will be delayed due to volcanic eruptions in Iceland that forced flight cancellations from Europe, according to BusinessWeek.

The Armani Hotel Dubai, in the Burj Khalifa, the world's tallest building, was scheduled to open its doors on April 21, but the opening date has now been pushed to April 27.

Every element of the hotel has been designed by the fashion legend, says a report by International Herald Tribune.

The 160-room hotel will feature eight restaurants and house Armani-branded retail stores, it says.

Real Estate Rents Expected to Drop More

Dubai Real Estate market overview report last month according to Jones Lasalle, Dubai’s present stock of office space stands at 43.6 million sq. ft. Currently, the vacancy level is estimated to be 33 per cent of that or about 14.4 million sq. ft. In addition, the 2010-2012 pipeline of newborn supply has been updated 33 per cent due to delays and project cancellations to 40 million sq. ft. from 60 million sq. ft. Roughly 54.4 million sq. ft. will most certainly remain vacant, that calculates to a vacancy rate of 65 per cent.

The average grade A rentals like in Downtown Burj Khalifa or Dubai International Financial Centre, are currently at Dh250 per sq. ft. and are estimated to decrease even further before stabilizing by 2011 at the earliest.

Approximately 54.4 million sq. ft. priced at a Dubai average of Dh150 would yield roughly Dh8.2 billion of annual revenue for landlords. So what do you do when you can’t rent all this space?

Consultancy firm CB Richard Ellis also reports and predicts that commercial and residential property rents in Dubai will continue to decline this assemblage due to oversupply and rising vacancy rates. Lease rates for commercial space in newer areas of Dubai, which have already dropped 50%, are expected to head lower ‘as competition for tenants continues to lead landlords towards greater incentive packages’, the report said. Residential units are also likely to see ‘a further diminutive contraction during the course of the next assemblage as a substantial volume of newborn residential accommodation reaches the final stages of construction’, it said.

Big move predicted in Dubai real estate

Dubai real estate market will see a shift from quality creation to quality management in 2010 as it looks to rebound from the impact of the global economic downturn, according to Jones Lang Lasalle.

Real estate brokers now recognize as separate professional category

The prospect of an 'all professional' concept in Dubai Property moved a step closer today with the Real Estate Regulatory Agency (RERA) announcing an commendation with the Ministry of Labour (MoL) to have Dubai real estate brokers officially recognised as a separate professional category.

New Labour Cards and Residence Visas issued to realty broker will now include their designation, in exchange to the previous practice of categorising them all as sales staff.

RERA is near to finalising a comprehensive agreement with the MoL which will see all the professions it registers - much as valuers, consultants, mortgage brokers, agents, and surveyors -formally recognised as separate job categories by the Ministry. Marwan containerful Ghulaita, Chief Executive Officer of RERA, said, \"This is the first step towards a complete classification of the real realty professions in Dubai.\"

Dubai Real Estate Brokers Warned by RERA

Dubai real estate brokers have been warned by the Real Estate Regulatory Agency (RERA) that they face losing their licence if they fail to intend approval before running any direct marketing campaigns. The move aims to halt unlicensed brokers from sending unsolicited and often inaccurate text or SMS sales messages to the public, following complaints from individuals who have been the target of book campaigns. Yousef Al Hashemi, Head of RERA's Licensing Department, said: 'Our priority is to ensure the campaigns are legitimate and not misleading,' adding: 'Failure to comply could mean the loss of a licence or entrance not being renewed. The rules are clear and should be rigorously implemented so to protect buyers and investors. For our part we routinely check all requests for authorisation to separate campaigns.

Real estate maintains healthy coverage in Q3

Despite the drop in new projects in the UAE, real estate companies maintained a healthy exposure in the local media with Emaar recording maximum coverage.

The Mediastow Q3 report on the real estate industry revealed that negative coverage of the property sector decreased considerably in the third quarter, compared to the same period last year. The report, the fifth in the series, analysed the media coverage of the UAE real estate sector, with a focus on Al Qudra Real Estate, Aldar, Emaar, Sorouh, Dubai Properties, Nakheel, Sama Dubai and Damac.

The 34-page report assessed the success of PR campaigns of the eight real estate developers, as well as threw light on how their media coverage fluctuated, and how it compared with each other.

Emaar – the largest real estate developer in region – maintained its lead in all sectors including manifest (explicit material exactly as it appears), PR driven and non-PR categories.

PR driven campaigns were not the highest content generators as "manifest" reports topped the list for Emaar in July 2009. This was closely followed by non-PR and positive reports in most months of the third quarter and PR-generated reports were a distant third and fourth in ranking for most of the time for all the developers.

The head of Mediastow, Mohamed Elzubeir, said: "As for coverage, Damac and Emaar had their amount of coverage peaks in July 2009, while Al Qudra Real Estate, Sama Dubai and Sorouh had their peak in August 2009. Finally, the coverage of Aldar Properties, Dubai Properties and Nakheel peaked in September."

Emaar, followed by Sorouh and Aldar, figured in the top three in terms of newspaper coverage size, measured in column centimetres (cc), in July and August 2009. September saw Nakheel in the lead, followed by Emaar and Aldar. A total of 3,962 articles from 168 publications were monitored between July and September 2009 for the report. Also, stocks movements of Emaar, Aldar Properties and Sorouh were evaluated and correlated with media coverage.

Compared to the third quarter of 2008, there was a general drop in numbers, with some experiencing a bigger drop than others. Al Qudra, Emaar and Nakheel experienced significant decreases in Q3 2009, compared to the same period in 2008, in terms of the volume of coverage.

In comparison to the 2008 Q3 report, there was a considerable drop in coverage of news items covering deals and partnerships. Even though the news of the landmark merger plans between Emaar, Sama Dubai, Tatweer and Dubai Properties was announced during this period, but it did not match the coverage of the same subject in the previous year's third quarter.

Damac and Al Qudra almost disappeared from the news coverage on deals in the last month of Q3, while Sama Dubai gained the maximum climbing up to 40 points to be at the top. Emaar maintained a steady position alternating between the second and third slot during the period, while Nakheel took a major plunge from leading in the same period in 2008 to a distant fourth in September 2009.

The overall drop in the coverage was most contrasting in the project category covering launch, reviews, updates and completion. From a healthy 246 points as the highest point of coverage, the average in third quarter of 2009 fell to below 50 points.

In a surprising turn of events, almost all leading developers increased their CSR activities.

Nakheel recorded the maximum coverage with 66 points and Emaar at a close second at 58. Other developers Aldar, Dubai Properties and Sorouh also increased their efforts and got reasonable exposure in return (all above the 30-point mark).

Print media – shouldering the maximum amount of media exposure in advertising and reporting – carried on the momentum with Emirates Business giving maximum exposure to Emaar, followed by Aldar and Surouh. Nakheel received the maximum exposure from The National and Arabic daily Al Khaleej gave maximum coverage to Dubai Properties and Damac.

Emaar, Aldar Properties and Sorouh experienced an upward trend in the third quarter of 2009. Aldar enjoyed a decent rise in terms of share prices throughout the quarter and inched up further during the latter part of September 2009.

The differences in coverage were not that great in terms of OTS (opportunities-to-see) and coverage size, with the exception of Al Qudra Real Estate, which experienced a very sharp drop. Interestingly, Aldar Properties maintained an average of 15,000 OTS throughout Q3 2008 and Q3 2009. Average OTS is a measure of the number of chances an average member of the target audience will have of being exposed to an advertising campaign.

September 2009 saw healthy recoveries in terms of OTS and coverage, as it exceeded September 2008 figures. This was the case for Damac, Dubai Properties and Emaar. Interestingly, while September 2009 provided healthy figures for newspapers' coverage size, it also substantially lowered coverage sizes of magazines.

The Prominence Index rankings were worse in 2009 across the board. Sorouh and Nakheel were the only two developers that managed to maintain the same Prominence Index in August 2009 compared to August 2008. July 2008 was the best month for the property developers in terms of Prominence Index in the third quarter of 2008, while September 2009 was the best month in the third quarter of this year.

Source: Business24/7

Property Prices Rise But Still Lower Over 2008

A widely watched index of Dubai property prices shows home values in the city-state edged higher for the first time since the market plunged, but are still down nearly half from a year ago.

The tally out Tuesday by real estate consultancy Colliers International indicates property prices in the third quarter rose 7 percent over the preceding quarter. That is the first increase this year.

Colliers regional director Ian Albert cautioned that the rise doesn't necessarily mean the market has hit bottom.

"It's too early to say," he said. "One quarter does not make a trend."

Even with the recent gains, Dubai home prices remain 47 percent below their level at the peak of the market just a year ago.

Many of the houses and apartments were bought as vacation homes and investment properties by foreigners from Europe, Asia and the Middle East.

Values plunged dramatically beginning late last year as the financial crisis dried up financing sources and scared away the overseas speculators that fueled the city's boom.

The rapid drop has erased more than two years of gains, leaving homes now worth about what they were in the spring of 2007.

Albert attributed the latest gains largely to the increased availability of mortgages and a growing perception of job security among some foreign workers _ particularly those not tied to the real estate sector, a major employer during the boom years.

As many as nine out of 10 Dubai residents are foreigners whose residency permits are usually contingent on continued employment in the emirate.

Colliers bases its index on mortgage data from local and international lenders. It measures prices in parts of Dubai where foreigners have been allowed to buy since the market was opened in 2002. Those areas were largely responsible for Dubai's real estate boom.

The consultancy said the going rate for Dubai residential property now averages 1,016 dirhams, or about $277, per square foot.

Despite the recent bump in prices, Albert said home values will likely slide further over the coming year as a glut of new properties nearing completion become available.

"It's going to happen," he said. "Prices will soften next year."

New company accomodation for InterContinental Hotels Group

Al-Futtaim Group Real Estate announces completion of new building at Dubai Silicon Oasis.

Designed by well-known local architects Architectural & Engineering Innovations Bureau (AEIB) and constructed by Al-Futtaim Carillion and Al-Futtaim Engineering, the new buildings - three in all - consists of 414 apartments with a mix of 1 bedroom, 2 bedroom and 3 bedroom apartments, and provide accommodation for all staff up to management level.

Amenities include an all day dining room, a hair salon, and prayer rooms alongside recreational facilities consisting of three swimming pools, a fully equipped gymnasium, television, internet and games rooms. The building will be managed by Al-Futtaim Real Estate.

DPRE Holdings Confirms Upward Trend in Dubai Real Estate Prices

The prices of luxury properties and properties in top locations in Dubai are showing a definite upward trend.

This was revealed by the findings of a survey conducted by DPRE Chronicle of its brokers in Dubai. The latest figures available at the end of the second quarter confirm the forecasts made by DPRE Chronicle on the basis of the data available in the first quarter of 2009. This segment has clearly bottomed out and is on the upswing. Local newspapers cite price increases from 20 to 40 percent. "Iconic" locations such as The Palm Jumeirah and Downtown Burj Dubai are at the forefront of this revival. A dozen other locations are already catching up.

The analysis clearly distinguishes between the positive trend in the top-level retail segment in select locations, and certain real estate funds, including European ones, which since 2008 have had to cope with severe problems. Potential investors should be aware of this difference. The macroeconomic environment of the Emirates is, nevertheless, investment-friendly.

Dubai Property Rental | Dubai Property

Dubai property developer Deyaar chairman resigns

Dubai Property developer Deyaar chairman Nasser al-Shaikh has resigned from his post, the Dubai property firm said in a statement on Sunday, without giving a reason.

Shaikh was replaced in May as head of Dubai's Department of Finance after spearheading the launch of the emirate's $20 billion bond programme in February, a move aimed at easing worries state-linked companies could default on debts.

"The board of directors of Deyaar will convene shortly to consider its ratification of the same," it said in a statement.

Deyaar did not name Shaikh's replacement.

Shaikh remains chairman of Islamic mortgage lender Amlak and is an assistant to the director of the ruler's court for foreign affairs.

Shares of Deyaar were down 1.5 percent at 0712 GMT in line a drop in the Dubai index.

"Al Shaikh is a respected entity in the industry but this news is unlikely to have any major impact on Deyaar's stock price until the reasons for his exit are made public," said Mohammad Ali Yasin, managing director at Shuaa Securities.

Pre-inspection of residences commences at Liberty House

ETA Star announced the commencement of the pre -inspection of the residences in Liberty House. Designed to be a distinctive and prominent architectural landmark in the Dubai International Financial Centre, the soaring forty-two storey structure consists of eight floors of spacious open plan offices, above which are twenty nine floors of luxurious apartments. With close to 140 offices and 220 residences, Liberty House stands tall at one of the prime locations in Dubai.

The residences area starts from 448sq ft. and ranges up to 1724sq ft area. All the residences are fitted with the best of the Italy and Belgium furniture. The studio furnishing includes a king size bed with Italian leather around the bed and the headboard, a love seat sofa made of Grande Ville Textured Fabric from the Mills in Italy, a lounge chair, coffee table and a side table, a full length mirror, a night stand and a reading desk with two chairs. One and two bedroom apartments have 2 seater sofa with cushion, TV stand, Dining table, dresser, bar table, standing lamp and night lamp. The furniture comprises of leather, black oak and frosted glass to gives the entire apartment a contemporary yet sophisticated look.

Dubai International financial Centre has multiple advantages, including being at a strategic location, and almost equidistant between the financial centres of Asia and Europe.

Mr. Abid Junaid stated that, "With modern design using a select palette of high quality materials and finishes both inside and out, ownership of these apartments will add significant value to the quality of life of our residents. We look forward to welcome more members to our family with this delivery"

Dubai property may not recover until 2011

The Dubai property market might not recover until late 2011 as a consequence of weak demand, according to a fresh report by Egypt-based investment bank EFG Hermes.

However, EFG Hermes does expect recent clarifications from the UAE government on home ownership to now improve investor sentiment.

Multiple-entry visas for expatriate UAE property owners, who qualify, will be issued from 1 June, officials announced earlier this month.

Overseas nationals buying property in the UAE will have to meet a set of requirements set out by the authorities. According to the ruling, the property should be worth at least £180,000, it should already have been completed, it should be wholly owned by the investor and the owner must earn a monthly income of at least £1,800 or equivalent in foreign currencies.

Real estate firm: Dubai rents drop 23 pct in 1Q

New research has shown Dubai residential rental prices dropped 23 percent in the first quarter of 2009 as the economic downturn forced foreign workers to pull out of the fast-expanding city.

Thursday's report by real estate company CB Richard Ellis has attributed the decline to job losses among expatriates, a drop in tourism and a considerable new supply of homes.

CBRE says the biggest declines have been in the newest developments built for job-seeking foreigners who had flooded into the oil-rich Persian Gulf's business and tourism capital during the boom years.

Prices in state-owned developer Nakheel's Discovery Gardens took the biggest hit, with rents falling by a third since late last year.

Is Real Estate Market really going down?

With the global economic crisis hitting Dubai's real estate market and other businesses, it has been reported that real estate business is going down specifically the off-plan properties. No premium properties or distress properties are common now in the market.

I am neither a real estate agent nor a broker but as what I have heard from agents and read from newspapers, I think that this is true. One of the popular Dubai-based estate developer as they say is laying off around 200 of its workers. The other property firm had reduced the level of its shareholding allocated for foreign investment from 20 percent to 15 percent to protect itself.

It has also been reported just in case you don't know that there are banks who are now reluctant to lend against a property that has yet to be built. And even car loans as what my colleague told me is now on hold, I don't know if this is true.

I have made a poll to see whether it is true that real estate market is really going down. You can cast your vote on the upper right portion of my blog if you think you still want to buy property in Dubai and you can give your comment why did you choose your answer.

Real Estate Agents: Dubai Real Estate Boom Is Ending

A six-year real estate boom in Dubai that spurred a $475 billion building frenzy has ended, according to agents who say sales are collapsing amid fears that the global economic downturn will hit the sheikdom.

“Last month was a real disaster and worse is coming I guess,” Mehdi Zoghbi, an agent at Middle East Real Estate Consultants, said on Sunday.

Zoghbi says that desperate sellers are now offering off-plan properties on the secondary market for a zero premium, effectively accepting a loss on their investment in order to offload quickly. Dubai, the first Gulf sheikdom to allow foreigners rights to buy homes, may also be the first to see a crash in property prices.

“Our commissions have fallen by up to 70% recently,” said Khaled Daji, an agent at Al Jabal Real Estate. “The most hit are the projects under development and those luxurious high end. We plan to survive for another six months to see how this crisis unfolds.”

But the city’s biggest developers like Emaar Properties PJSC and Nakheel are adamant that sales remain robust. Mohammed Alabbar, Emaar’s chairman and one of the architects of Dubai’s real estate boom, said in the company’s third-quarter statement that “we are very confident of our company’s fundamentals and future growth.”

That hasn’t stopped investors dropping the company’s shares. Emaar’s stock has fallen 62% since the beginning of the year, that’s more than the 48% fall in the Dubai Financial Market’s main index over the same period, according to Zawya.com data. Earlier this month, Colliers International said the growth of property prices in Dubai slowed to 16% in the second quarter of 2008 from 42% in the first quarter. Morgan Stanley warned in August that property hotspot Dubai could see a 10% fall in prices by 2010.

A collapse in real estate prices will add to pressure on Dubai’s economy, ♂which doesn’t benefit from the vast oil income enjoyed by neighboring Abu Dhabi. Property and construction╚ are estimated to account for about 30% of the emirate’s economy.

Meanwhile, the nerve - and wallets - of Dubai’s shoppers will be tested this week when, against a tide of global economic woe, the region’s largest shopping mall opens. Covering an area of more than 50 soccer fields, Dubai Mall will have more than 1,200 shops; one of the world’s largest indoor gaming arcades; an Olympic-size ice rink; the world’s largest indoor Gold Souk; and one of the world’s biggest aquariums, which will be home to more than 33,000 types of sea life, including over 400 sharks.

Source: RealtyTribune

Raising the roof

The real estate boom that has fuelled the prodigious growth of Dubai and fast-tracked many to a better life in the sun has been hit by a series of steep hikes in the cost of core building materials. Add to that continuing housing supply shortages and all of a sudden (if HC Securities Brokerage is to be believed) you have a city whose property market is rapidly approaching the price levels of London’s West End.


With its large-scale real estate projects, Dubai has become more than just a playground for discerning holidaymakers and professional expats. But with increasing costs and supply fears, developers are fearing huge financial implications for the construction industry which, according to Abdulrahman Al Tassan, CEO of Rakaa Property, may lead to a crunch that could add to inflationary pressures, create an economic slowdown and cause a subsequent investment collapse.

But cynics predicting the imminent demise of the emirate’s property boom have so far been wide of the mark, says Blair Hagkull, managing director of Jones Lang LaSalle MENA, who is confident fresh supply will come to the market this year. But, he says, problems persist in the short term.
As demand outpaces supply, Hagkull says the region will be faced with a ‘flight to quality’, where property-seekers take what they can get from a market fast running out of prime real estate in the most desirable locations. Tassan believes that the pace of development in Dubai has become its own worst enemy, as the availability of both building materials and manpower has been overtaken by the sheer speed of development.

Record oil prices, surging inflation and droves of expats combined to produce a 19 per cent rise in property prices last year - a figure well above market expectations.

Tassan cited local statistics, which found the total value of land transactions in Dubai to have risen 70 per cent in 2006, compared to the previous year. This surge in investment has created distinct areas within Dubai and established patches with unique characteristics and serving specific purposes.

“Dubai’s real estate market is not the homogeneous market that it was five years ago,” contends Hagkull. “We very clearly see a differentiation between the older historic areas of Bur Dubai and Deira and the central business district in the World Trade Centre area. Then there’s what is referred to as ‘new Dubai’, which takes in Internet City and the Marina.”

While banking giant HSBC has said it doesn’t expect supply to catch up with demand until 2015, Hagkull says that the 300 per cent rise in property prices seen in the last five years is a phenomenon that’s not likely to be repeated. “We’re seeing a broader trend to a more maturing of the market. Once you’re at a world level, it’s unlikely you’re going to reach twice that level any time soon.”

A formidable force weighing on the tireless expansion of Dubai is the new laws governing the financing of developments, while others predict that the breakneck pace of construction will eventually tip the market into a state of oversupply. Then there is the question of what will happen years down the line when developers have to pay back the loans which, in the wake of the global credit crunch, have been more readily available as borrowing is cheaper.

But Hagkull says much of the answer for the long term lies right here in Dubai, in the form of pent-up demand. “Right now, Dubai is about 25 per cent under-served. It’s only natural that if you have limited space, you put more people in that space. In the long run that has an impact on employee satisfaction in the workplace. So we anticipate a reallocation of space, as people move out of less-than-optimum locations. This will accommodate a significant amount of demand,” he said, adding that it would create a cascading effect, where people leave less optimum, smaller, older and more distant locations and move into the central areas.

Whatever the doom-mongerers say, the overwhelming international interest seen at the International Property Show over the past three days suggests Dubai’s surging real estate market is here to stay and has served as the opening salvo to what is shaping up to be another lucrative year for the emirate’s property sector which, according to research reports, is responsible for up to 50 per cent of all property-related activities in the Gulf.

Article source: www.7days.ae/business