Dubai developers race to lure property buyers
Dubai, a city defined by its glittering towers and man-made islands, is stuck in a five-year property downturn, drawing warnings of an industry reckoning that will see weaker players fail. Property developers are slashing prices and offering ultraeasy 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 that Dubai hopes will deliver an economic windfall and some 300,000 new jobs, hundreds of megaprojects have been unveiled in recent years, leading to an oversupply and a slide in prices.
The government rushed to rescue the sector in 2018 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 percent of Dubai’s economy, may not stabilize before 2021.
“Over a period of time, some correction will happen,” exposing the strong and the weak in the industry, said P.N.C. 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 told AFP at an industry expo where his firm was showcasing its latest multibillion-dollar project, an 8-million-square-foot beachfront development of luxurious apartments townhouses.
Like Sobha Group, dozens of local and international property firms taking part in this week’s Cityscape Global event were offering unprecedented payment terms to drum up business. Buyers are being asked to stump up as little as 5 percent of the value of the property, down from 25 percent in the boom times, and pay the rest over 10 years or more straight to the developer — without the need for a bank mortgage.
and
high-end In a sign of the desperation, developers are also offering to cover the costly 4.0 percent 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 percent to $60.7 billion last year, according to government data. 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 percent in the second quarter of 2019, falling for the 11th quarter in a row according to central bank data.
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 2020, 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 percent of them expats — is seen as a key element suppressing demand.