industry trends insight
Trend
04
NEW REAL ESTATE INVESTMENT PARADIGM
Longer term view on real estate
Investors focusing on secure, predictable income streams rather than short-term capital gains
Little appetite for incomplete product without secure income stream: tenant quality/credit worthiness and proven asset performance In line with global market practices
Are investors and developers really cognisant of the fact that investment into UAE real es- tate is now a long-term exercise?
There is still significant short-term money to be made where cash is king, and for those that are able to not just be a passive investor but to take over a project. A lot of projects are 90 percent complete and have stalled, and a modest amount of money can take an asset that’s almost completed and drive it forward. Those who are able to marry financing and expertise are the ones that can do well. The reality now in this marketplace is that,
for the better part of 18 months, we have come to a point where one era has ended and we have entered a new era that is much more stable and focused on fundamentals, and is therefore sustainable.
Trend
03
REBUILDING TRUST AND CONFIDENCE
Improvements in transparency and regulation
The need for greater transparency no longer optional but a necessity
Return of trust essential in the race for competitiveness
Both public and private sector responsibility Moving to greater maturity
Will we see government-mandated regulation regarding information disclosure or is transpar- ency an ongoing mid-term concern?
Many people are still trying to ascertain the scope and scale of the current situation. And so the ability of the different planning councils in Abu Dhabi and Dubai to be able to share information about the state of the industry within their home markets is, and will increasingly be, really helpful. In challenging times the issue is over-communication. Part of our role is to advise government,
and what we have seen is that in the most buoyant times real estate professionals, which have always had an entrepreneurial bent, have had the attitude of ‘just let me get on and do my job’, then when times get tough, they say ‘where are the regulations’?’ This is something that takes time. For example, there is no clear law in the valuations area regarding how regularly public companies need to have their assets valued; in many parts of the world that happens annually. If this were to happen across the region, conducted by a credible valuer, then openness would change overnight and confidence would get a huge boost; in many respects it could revolutionise the industry. If you are an investor, then it is important for you to know year-by-year and have that decision-making tool in place for other investments. With respect to licensing it is also very
important, but the market downturn has really separated those who are serious about real estate from the rest. The Gulf is one of those rare places where the real estate boom took place without an international investor community. If those people start to come here then the market is regaining health.
Trend
02
GENERATING DEMAND
The key to recovery
Stimulating end-user demand critical to timing of recovery
Moving from transient visitor to long-term resident demand
Shift from a supply-led to a demand-led market Initiatives aimed at employment generation: sustainable job creation; support for development of SMEs; increased inward investment; reduction of operating costs
This is a huge challenge across the economy as a whole. Are we ready to turn our attention to developing the long-term economic model rather than focusing simply on supply?
The head of the Dubai Chamber of Commerce recently said that it is important for the future of the market to focus on things like trade and logistics, for example, because real estate is more about being an enabler than being a major driver in the economy. Many people are fixated on how many new
units etc., but our hope is that everything that is substantially under construction gets completed. In terms of image, the economy, and investment you don’t want to have half completed buildings because that represents lost opportunities. So much of the supply side has been written and we are so focused on it that we sometimes forget the demand dynamic. “Just like investor confidence, one of the things that made the UAE very successful was that it leveraged its geography and had policies and processes that people could adhere to, as well as being the hub for what was happening in the broader region. Now with the supply story already written, things like job creation and stability are of paramount importance. It’s not a quick fix, but does take a shift in
mindset. With real estate we need a certain level of transience, but it’s really hard to build an economy on people who are here for two to three years, and the focus is now on creating a more mature country.
40 /
/jun-sep 2010
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