Dubai’s residential sector in recovery mode

Deputy Ruler cuts the ribbon signaling the launch of eagerly awaited exhibition. (WAM)

Cityscape Global 2010, the flagship event of the world’s largest business-to-business real estate investment and development brand, opened for business on Monday amidst a wave of optimism from regional and international investors after a spell of positive economic indicators since the Dubai World debt restructuring was completed earlier in September.

Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, officially opened Cityscape Global at the Dubai World Trade Centre.The flagship event of the world’s largest business-to-business real estate investment and development brand is being held in Dubai for the ninth year and has evolved from Cityscape Dubai as a result of the increased international participation it has attracted.

The real estate investment and development show which has thrown the spotlight on global emerging markets, runs until Thursday at Dubai World Trade Centre.

A major consultancy firm said, meanwhile, that residential property prices in Dubai should stabilise in a couple of years, and recent positive news flows that are coming out could revive investment sentiments in the sector.
“As long as the property supply doesn’t surpass the demand too much, we should see a stabilisation of Dubai’s residential property prices within the next two to three years. As per the statistics, there are as many as 25,000 residential units scheduled to be developed in Dubai this year as well as in 2011. But it’s not certain whether all of these 25,000 units would be delivered. Although rents would continue to fall gradually, they are expected to flatten out by the end of 2011 and 2012,” Chris Waight, Associate Director, Cluttons, Dubai, told Emirates 24|7.

He said Dubai’s property market has switched from being a speculator-driven market to being an end-user market that is a good sign.

“All the sales transactions that we’re seeing tend to be towards end users who’re looking for staying in Dubai for at least 3 to 5 years. Another encouraging sign is that out of more than 100 residential projects under construction in Dubai that we monitor regularly, a majority of them were put on hold until a couple of quarters back. However, a lot of these off-plan projects are now moving forward to finish off the projects.”

However, he added Dubai’s residential property market has been through a difficult period, particularly over the last 6 months.

“The sales price index that we have launched shows a downward trend over the last two quarters in terms of rentals as well as for sales transactions for residential properties. This downturn probably was mainly due to the holy month of Ramadan, summer vacations as well as buyers adopting a wait-and-see attitude. Many of the prudent investors were in anticipation that the prices would fall further, or the mortgage rates would get cheaper,” he said.

Nevertheless, of late, a host of encouraging news flows has started pouring in that could revive investment sentiments in Dubai property market, he said.

“For instance, the mortgage firm Tamweel announcing its come back into the market is going to restore confidence in the market. If Amlak follows suit that would further compound the confidence in the market,” he said.

Further, Nakheel’s reported announcement that it’s going to issue bonds, Dubai World’s recent agreement with 99 per cent of its creditors, and sovereign bond issuance by Dubai are other positive signal for the property market in Dubai. In addition, banks have started lowering mortgage rates in Dubai and some of the leading banks are offering mortgage loans at rate as low as 5.99 per cent, he added.

 Roham Marwaha, CEO, Cityscape, also pointed to the flurry of good business news throughout the emerging markets, that have boosted investor sentiment, but none more so than Dubai recently.

“Although Dubai World’s successful $25 billion loan restructuring was undoubtedly the catalyst, there has been other encouraging news, especially the $1.25 billion dual-tranche bond issued by Dubai Government just last week. The bond was four times oversubscribed and will be used towards infrastructure projects. A number of other key announcements have been made since,” added Marwaha.
Marwaha was clearly referring to the Nakheel confirmation that it had paid almost $1 billion to creditors and further news that it would restart work on a number of its stalled projects. Dubai Islamic bank also announced that it had increased its stake in mortgage lender Tamweel to 57% and declared that it would resume lending before the end of the year.
“Even today the Real Estate Regulatory Agency, announced that it would work with banks to raise up to $1.36 billion to try and finish 48 developments currently on hold. Also the news that Emirates Islamic Bank could merge with Dubai Bank and bring Amlak under the same umbrella could further boost liquidity into the market,” said Marwaha.
According to US investment guru, Tom J Barrack Jr, a keynote speaker at the Cityscape Global Real Estate Investment conference, who has invested over $45 billion in real estate, claimed that smart money is now focusing on emerging markets as many have dramatically outperformed more mature markets such as the US and Europe in recent years. 
“Many developed economies are already heavily indebted in addition to running annual budget deficits, compounding their debt levels. These scenarios won’t unwind overnight, it will take time. On the other hand, developing economies are not running deficits and are not nearly so indebted, allowing their economies to grow quicker, giving higher returns,” said Barrack.
The flagship event of the world’s largest business-to-business real estate investment and development brand is being held in Dubai for the ninth year and has evolved from Cityscape Dubai as a result of the increased international participation it has attracted.
Sentiment on the exhibition floor matched that of the organisers and speakers. Fernando Fischmann - Creator and owner of Crystal Lagoons Corp, which is developing the largest lagoon in the world in Egypt commented: "Irrespective of the Dubai government bond, I’m confident that Dubai and the wider region will come back. However it is worth pointing out that the global crisis is not a problem for everyone, if as a developer you can add value. That makes a good investment."