The Phnom Penh Post

Dubai developers race to lure buyers as downturn bites

- Omar Hasan

DUBAI, a city defined by its glittering towers and man-made islands, is stuck in a five-year property downturn with no end in sight, drawing warnings of an industry reckoning that will see weaker players fail.

Property developers are slashing prices and offering ultra-easy financing to lure customers, while concerned authoritie­s have stepped in with incentives and regulation­s to revive the crucial sector.

Ahead of the Expo 2020 global trade fair later this month, which Dubai hopes will deliver an economic windfall and some 300,000 new jobs, hundreds of mega projects have been unveiled in recent years, leading to an oversupply and a slide in prices.

The government rushed to rescue the sector last year with a raft of measures including easy visa terms for expatriate buyers and permanent residence permits for big investors. This month, a top-level committee was establishe­d to rebalance the oversuppli­ed market.

The Standard and Poor’s ratings agency has said the industry, which makes up 7.2 per cent of Dubai’s economy, may not stabilise before 2021.

“Over a period of time, some correction will happen,” exposing the strong and the weak in the industry, said PNC Menon, chairman of Dubai-based multinatio­nal developer Sobha Group.

The process, which will leave only the strongest firms standing, is likely to last for another three or four years, Menon said at an industry expo where his firm was showcasing its latest multi-billiondol­lar project, a 743,000sqm beachfront developmen­t of luxurious apartments and high-end townhouses.

Like Sobha Group, dozens of local and internatio­nal property firms which took part in last week’s Cityscape Global Exhibition were offering unpreceden­ted payment terms to drum up business.

Buyers are being asked to stump up as little as five per cent of the value of the property, down from 25 per cent in the boom times, and pay the rest over 10 years or more straight to the developer – without the need for a bank mortgage.

In a sign of the desperatio­n, developers are also offering to cover the costly 4.0 per cent municipali­ty registrati­on fee.

Property ownership in Dubai, which boasts the most diversifie­d economy in the oil-rich Gulf region, is completely open to foreigners – both residents and visitors, and for investment or residentia­l purposes.

But real estate deals in Dubai plunged 21.5 per cent to $60.7 billion last year, government data shows.

Property prices and rents have been on the decline since mid-2014, shedding around a third of their value.

“As far as downward trends go, this one has lasted far longer than most, and far longer than most of us expected,” Lukman Hajje of research firm Property Finder said in a research paper.

“With the amount of property still being launched, under constructi­on, and being handed over – it’s unlikely that we have seen the bottom of the market just yet.”

Dubai property prices dropped by 5.8 per cent in the second quarter of this year, falling for the 11th quarter in a row according to central bank data.

Despite the glut, last year some 22,000 new units were completed in the emirate, according to consultanc­y JLL, the highest number of new properties to enter the market in the past five years.

JLL forecasts that up to 117,000 units could be added to Dubai’s housing pool by next year, putting further pressure on prices in a city where glitzy apartments line the coastline, and gated communitie­s stretch back into the desert.

The rising cost of living in Dubai, a city with a population of 3.3 million – over 90 per cent of them expats – is seen as a key element suppressin­g demand.

The city state was ranked the 26th most expensive place in the world for expats to live in last year, said US consultanc­y firm Mercer, second behind only Tel Aviv in the Middle East. In 2013, Dubai ranked 90th on the same survey.

Companies whose profits have taken a nosedive have taken to setting up stands in the city’s mega malls to display their products and court customers, and some are pivoting from vast condos and villas to more affordable projects.

Raymond Khouzami, CEO of developer Al Thuriah Group, was at Cityscape to promote the firm’s 47-storey tower of mostly small studios and one and two-bedroom apartments.

“We have to go with the market. We have to extend our payment plans and go through bank facilities and longer payment plans. We have to drop the prices as the market requires,” Khouzami said.

 ?? KARIM SAHIB/AFP ?? Property firms offered unpreceden­ted payment terms to drum up business at Cityscape Global Exhibition 2019 at the Dubai World Trade Centre in the Gulf emirate.
KARIM SAHIB/AFP Property firms offered unpreceden­ted payment terms to drum up business at Cityscape Global Exhibition 2019 at the Dubai World Trade Centre in the Gulf emirate.

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