What is happening in Dubai Property Sector?

With Dubai property sector undergoing a transitional phase, companies are reviewing their project strategies, and developers are more cautious with their future investments on projects, as several mega-developments are now being reviewed.

For instance, Nakheel has announced that parts of the Dh.350bn Jumeirah Garden City, the Trump International Hotel, the Tower on Palm Jumeirah, and the kilometer-high tower will be put on hold.

Even work on 'The Universe' will be restricted to preliminary studies, Nakheel said. Decrease in liquidity and financing has led to delay in progress of such projects, resulting in these projects bearing the brunt of financial turmoil. The mega-projects that had earlier brought about a property boom in Dubai, have now been put on hold.

Limitless too, revealed that it is reviewing construction schedule of Arabian Canal. The Head of Dubai's RERA, Marwan bin Galita, said that developers need to review their projects which are yet to be launched for sale. Recession is a very crucial phase, and RERA had been urging developers to do this about a year back, Galita said.

The Chairman of Crisis Management Committee, Mohammad al Abbar, last week said that it would pull back on its building spree due to the current financial crisis. Apart from backing out of its projects, Nakheel has also laid off 500 employees, constituting 15 percent of the company's work-force. All the 500 employees were offered redundancy package, including outplacement support services to assist them during this transitional phase.

Better Homes, Damac and Omniyat too, have followed suit, with Better Homes axing 50 jobs, Omniyat with 69 jobs, and Damac laid off 200 jobs, with the drop in demand for properties.
Meeras however, said that it does not have plans for lay-offs at the moment.

According to analysts, about 819 employees have lost their jobs in the Dubai real estate sector till date, with more to follow. However, the Head of Research and Consultancy at Cluttons, Matthew Green, said that these happenings are not restricted to the realty sector alone, and few other major corporate too, have announced staff reductions.

In the meanwhile, the time is now appropriate for small developers to join hands to bring confidence back into the market, say analysts.

A member of Financial Crisis Committee said that Dubai has been witnessing plenty of defaults on high-end properties with worsening financial conditions, and there are possibilities of merger among smaller developers. Even Head of RERA, Marwan bin Galita, agrees that merger between small companies would bring in more confidence, as good mergers in any sector adds more value to the sector.

The developers, Union Properties and Deyaar, although denied talks about any plans of merger, they were unable to comment on whether the government would order their merger.

Secondary prices in Dubai and Abu Dhabi fell 4 to 5 percent in October from the previous month, while the villa prices of Dubai dropped by 19 percent, under strict lending conditions, according to a recent HSBC statement.

The "off-plan" market is not doing too well, due to market speculations. Few of the banks have stopped financing, while few developers are said to be demanding exorbitant prices. However, the prices of "affordable" off-plan properties may pick-up during second quarter of 2009, if the banks improve on their lending, Bin Galita said.

RERA is likely to implement a new law on registration of off-plan properties next week.

On the whole, Dubai real estate sector has met with stringent mortgage lending measures, liquidity crunch, and real estate slowdown during recent months. The indications of property boom in Dubai, have atleast, temporarily halted, and developers are seen scaling back on their projects, while jobs are cut and property prices have plummeted.

Problems with Dubai Property sector

Dubai´s property market which already saw a plunge of more than 40 percent in the first quarter of 2009 suffered another blow after a respected ratings agency forecasted that the country is in debts that it may have trouble repaying.

According to a report by Property Frontiers, Standard & Poor´s Ratings Service (S&P) downgraded ratings for three government backed entities, namely, port operator DP World, the Jebel Ali Free Zone and Dubai Multi Commodities Centre Authority, putting the trio on credit watch since April.

“The rating actions reflect Standard & Poor’s reappraisal of the likelihood of extraordinary financial support by the Government of Dubai to ensure the timely repayment of their financial obligations,” the agency told Property Frontiers.

S&P said the reappraisal also was the result of “increased uncertainty in regards to the government’s willingness to provide such support” to Nakheel, the property developer who built Dubai’s manmade islands.
On a separate report by Property Wire, the downturn in the property market in Dubai has resulted in about 400 people losing their jobs at major developer, Nakheel.

Property Wire reported that Nakheel, whose ambitious projects include the Palm Islands, has made the latest redundancies on top of 500 that were carried out in December.

´Nakheel continues to re-adjust its current business objectives to match supply and demand in the most effective way,´ a company spokesman told Property Wire.

Developers, who were mostly reliant on off-plan sales to finance the construction of their projects, have struggled to collect payments, leading to rising defaults, while payments to suppliers have been delayed.

High profile development projects have also been delayed and it is estimated that currently over £335 billion of projects have been halted or are on hold.

Dubai´s real estate market is the second worst performing housing market according to a global housing price research, coming in 44th in ranking – second only to Latvia.

S&P said the downgrades “reflect our view of the stand-alone credit profiles of the entities, which in certain instances, we consider to have deteriorated.”

Dubai Real estate sector - July 2009 update

For instance, Nakheel has announced that parts of the Dh.350bn Jumeirah Garden City, the Trump International Hotel, the Tower on Palm Jumeirah, and the kilometer-high tower will be put on hold.

Even work on 'The Universe' will be restricted to preliminary studies, Nakheel said. Decrease in liquidity and financing has led to delay in progress of such projects, resulting in these projects bearing the brunt of financial turmoil. The mega-projects that had earlier brought about a property boom in Dubai, have now been put on hold.

Limitless too, revealed that it is reviewing construction schedule of Arabian Canal. The Head of Dubai's RERA, Marwan bin Galita, said that developers need to review their projects which are yet to be launched for sale. Recession is a very crucial phase, and RERA had been urging developers to do this about a year back, Galita said.

Dubai real estate market unlikely to crash: Nakheel Chief Executive

Real estate market of Dubai will not crash, however, a maturing market will draw the line between winners and losers, Nakheel's chief executive said.

Chris O'Donnell said: "Dubai has certainly entered the next phase of property development whereby the consumers can intelligently and confidently shift through the myriad of property offering. The word ‘correction' has been often misused in the property sector as a crash."

Prices of the real estate projects that offers zilch value will bite the dust, but quality developments in the right locations of Dubai will enjoy an excellent price appreciation, owing to more regulation, consumer protection and transparency, Nakheel's Chief Executive said, adding that the UAE emirate's property market's exogenous factors will help realty growth organically.

Reclamation of Nakheel's Dubai Promenade project complete

Nakheel has completed the reclamation of Dubai Promenade by placing the last rock on the project's breakwater. The breakwater, stretching 18kms, required 1 million tonnes of rock.

Dubai Promenade is Nakheel's sophisticated waterfront project, which will form a virtual peninsula along the Dubai shoreline, inclusive of a spectacular five-star wheel-shaped hotel.
The Promenade, surrounded by marina, sea and a natural beach will offer panoramic views, idyllic walkways, and well-planned architecture, which render a unique residential and commercial environment.

The first phase sale of the Dubai Promenade was launched on 24th January 2008.

Nakheel, being one of the largest private real estate developers in the world, is a major player contributing to realize the Dubai vision for the 21st century, by offering a world-class destination for living, business and tourism.

Latest real estate project by Nakheel re-defines Dubai property industry

Nakheel, one of the master realty developers in Dubai and creator of the 3 Palm Islands and 'The World', has re-defined Dubai property industry by unveiling its fifth offshore project, 'The Universe', a mega-development of residential, commercial and tourism projects. 'The Universe' is a collection of large coral-shaped islands; covering 3000 hectares, it will stretch from Palm Deira and Palm Jumeirah

“The biggest risk is not taking a risk at all,” said Sultan Ahmad bin Sulayem, Executive Chairman, Nakheel. 'The Universe' will be developed in a span of 15 to 20 years. Nakheel expects overwhelming investor response to its latest offering, along the lines of what 'The World' evoked a few years ago. About 50 percent of 'The World' has already been sold out.

In addition to the unveiling of 'The Universe' and the iconic 'Blue Communities', Nakheel has also announced the launch of a third real estate project in Dubai that will replace the historic Port Rashid. Spread over 700 hectares, this development will take more than 10 years to complete and is slated to accommodate over 300,000 people.