Dubai real estate begins to get building again
Posted on 05 September 2010 with 2 comments from readers
Two years since the sudden stop in the Dubai real estate sector amid the global financial crisis and the builders are starting work again. The enormous new advertising placard for the Dubai Pearl project now greets residents returning from their summer vacations.
This is the multi-billion dollar, high-rise development just in front of the entrance to the Palm Jumeriah by Abu Dhabi’s Al Fahim family of the ‘From Rags to Riches’ book (pictured above).
Stalled projects
There are signs too that work will soon start on many stalled projects. Union Properties told The National that it is in negotiations with two contractors to complete the 75 per cent built Renaissance Dubai MotorCity and Marriott Courtyard.
Earlier in the summer the Dubai Government announced a new scheme to restart construction work on a short list of projects and this autumn will likely see a push to get those buildings nearest completion finished.
Dubai has also made some progress with asset disposals since the crisis with more than $850 million raised over the past year.
Hopefully after the Eid holiday this weekend the $23.5 billion Dubai World debt rescheduling will be finally signed off. These negotiations have apparently also included a potential asset sale list to cover $14.1 billion in debt, although this is not thought likely to actually take place.
Nobody expects work on the second Palm Jebel Ali to resume immediately or in the near future. Vast swathes of the Dubailand theme park also seem to be on permanent hold.
But what does emerge pheonix like from the ashes of the bust is a city with an unmatchable reigonal urban infrastructure. From the new airports to the Dubai Metro and high-rise commercial districts and residential towers and communities. That rents have fallen is bad news for landlords but good news for new businesses.
Dynamic city
Dubai is a commercial hub city that can reinvent itself with the ease of a revolving door as one set of expatriates leaves and another group enters.
The boom years of real estate construction are over but the finishing off of the projects left behind is a good sign that the city continues to believe in its own growth prospects. Multinationals continue to set up shop in Dubai and expand their operations.
You have only to read about the plans being made by HSBC, Standard Chartered and Barclays to abandon their UK headquarters to realize that the tables can turn in favor of a low tax, business-friendly city.
2 Comments posted by readers:
Completing projects sounds nice but the supply/demand dynamics will remain mega bearish for real estate.
Unless asking prices for sales are below 400 psf, and rental asking prices below 30-40 dirhams psf.
Rents have fallen drastically by now but must fall much much much further to make Dubai truly attractive again as a business/commercial hub. Commercial asking rental prices are still ridiculously high.
I agree with your long-term bullish outlook on Dubai, but the only thing I see that can meaningfully save the economy in the short to medium term is falling asking commercial rent values.
Shops and restaurants are closing, mainly because of the ridiculous rent expected of them to pay…
Once this phenomenon stabilises, then we can start talking business.
Peter I’d like to see you discuss what Emaar is worth right now.
I’m not so sure how they are building again while Dubai Holdings is having trouble paying off their old debts (Or minimum payments to say the least) on time. Sounds like another default to me. When Greece and Spain follow things should get worse.
Not being able to make this minimum payment that is due means people are not buying any properties now so they in return do not have money to pay of their bills in return. This is what made it to the media as well so we can imagine what else there is out there that did not make it to the media. Recovery or bottom when they can not make their minimum payments on time sounds like a lie to investors,buyers and the average Joe out there.