Cityscape indecision highlights Dubai property dilemma

Posted on 22 September 2009 with no comments from readers

The Cityscape property exhibition which starts on October 5th suffered a major blow just over a week ago with the announcement that the two Dubai realty giants Emaar and Nakheel would not be taking part. But in a complete volte face the two have now decided to participate.

You have to wonder what led to this change of heart. It certainly sounds as if the bigger picture has triumphed over some cost accountants view of the market.

Open for business

For while in the short-run saving money on marketing makes good sense with nothing new to sell, in the long-run this might send an awful message that Dubai property is now closed for business and has shut up shop.

The truth is somewhat closer to the latter than the former. The Dubai property boom was firing on all cylinders last autumn just as the world economy entered a massive recession with the credit crunch.

The loan facilities for property developers dried up over night and on many projects the contractors walked off the site because payments stopped. It was as simple as that. Nobody decided to stop. It was the money that stopped.

Drive around Dubai today or take the nice new metro and you can see dozens – perhaps more than a hundred – construction sites that have stopped dead. The biggest are probably the City of Arabia in Dubailand along the Emirates Road and the Jebel Ali palm island.

But you can count dozens of stalled construction sites from the vantage point of the Dubai Metro. Look at the far-end of the Dubai International Financial Centre or the Business Bay commercial zone, or the Jumeirah Lake Towers.

So while Emaar Properties and Nakheel’s change of heart on going to Cityscape 2009 might be the correct decision, it can hardly hide a painful reality that anybody can see if they open their eyes.

Boom reversal

It is also perhaps a shame that the correct decision was not made first rather than this embarrassing reversal. But then the same could be said about the whole of Dubai real estate: why did so many projects rush ahead all at the same time and then stop dead?

Future historians will have to answer that question, and the market place will now have to sort out the Dubai property sector.

Rents and prices are down 30 to 50 per cent from peak levels, and this should start to generate some renewed demand if the global economy continues on its slow recovery path. But a return to the boom of Cityscape’s past is just not going to happen.