Shifting sands
Andrea Kirkby looks at the property market in the world’s most troubled region.
D
ubai was the most exciting property market on earth. Developers weren’t just building villas and apartments; they were
creating new islands, building the world’s highest tower. It seemed there was no limit to their ambition, until in November 2009, when Dubai World sought to delay its debt payments. The credit crunch had arrived in the Middle East. Since then, Middle Eastern
markets have seen prices fall significantly. And just when you might have thought it was safe to go back into the water, popular protests in other Arab countries have upped the risk profile of the entire region. Even easy-going Oman has seen anti-government demonstrations, though 250 people does not, yet, make a revolution. The overall factors affecting the
Arabian countries are similar; wealth from oil and gas exploitation, high economic growth, youthful populations, and the very recent lifting of restrictions on foreign ownership of property. There’s also the uncomfortable fact that the oil
44 APRIL 2011 PROPERTYdrum
Above: View of the Jumeirah beach in Dubai.
Below: United Arab Emirates: Dubai night skyline with the new constructions at the Sheik Zayed Road.
DUBAI
and gas reserves are limited, Bahrain, for instance, could see its reserves depleted within 10 to 15 years. Governments have responded to this by investing in new industrial sectors; Dubai has invested in ports to become a transport hub, as well as a centre of tourism and financial services, while Bahrain and Qatar developed strong financial services sectors. However, each of the Gulf countries has its own profile, and so do their property markets.
THE EMIRATE GIANTS The ‘big two’ of the Gulf markets are the leading pair of Emirates states, Dubai and Abu Dhabi. While Abu
Dhabi is actually the largest by area and Gross Domestic Product, Dubai has the larger population and is generally seen as the leading business centre. It’s also Dubai that has received the most attention for its real estate development, both with its ambitious plans and more recently for its colossal crash. According to Cluttons’ local office,
prices are down 60 per cent from their 2008 peak, twice the fall seen in the US, for instance. The team believes prices could still fall another 10 per cent over the next couple of years as fresh supply floods the market; there is already a large overhang of unsold stock. Most developers are completing their projects, indeed Nakheel recently restarted six projects that had been put on hold, since low interest rates make debt servicing easy, while construction costs have fallen significantly. The first half of 2012 is likely to see a huge number of completions, so it’s unlikely prices will start to firm up until at least some of that supply is soaked up. According to Deutsche Bank,
rents fell by 0.7 per cent in January 2011, and prices by 1.9 per cent.
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