Softening of the Dubai property market in 2015 is unlikely to carry beyond mid-2016, says Union Properties chief, who believes the market will re-enter recovery mode thereafter.
“The property market has softened this year after it witnessed price growth in the last two years. We are expecting the market to pick up from mid-2016 with the geopolitical situation in the region improving with the momentum lasting till 2020,” chairman Khalid bin Kalban said, after announcing the launch of Dh750-million Green Community West - phase 3, on Tuesday.
He ruled out any oversupply in the residential market, saying, “As far as rents are concerned, they are increasing and that is a clear indication that there is shortage in the market.”
Kalban joins the list of property developers who have already discounted the news of oversupply in the market.
“Contractors in Dubai have limited capacity and with projects starting at Al Maktoum Airport and Dubai South, contractors will decline to take more projects because their plate is full… this will push the supply to later years.”
Kalban said market slowdown was visible in the top luxury market, but the mid-to-low segment was growing.
“Our townhouses in the new Green Community project are almost 50 per cent smaller than the villas we launched at the same community 10 years ago. So we have adjusted our project as per the market requirement.”
The Green Community West expansion will house 210 townhouses and 16 duplexes. Prices will start at Dh850 per square foot with the units being delivered in three phases during 2017.
Wade Adams completed the enabling work in March 2015, with Shapoorji Pallonji Mideast commencing work on the main contract.
The first two phases of Green Community has over 1,500 units and is home to estimated 8,000 people.
Dh450m profit for 2015
Kalban said the company was expecting to report a net profit of Dh400 million to Dh450m for full year 2015, while the third quarter net profit projection was Dh100m.
“We are expecting fair valuation to help us reach the full net profit estimation,” he added.
The first-quarter profit fell by 84 per cent to Dh28.1m, while the second quarter profit declined by 96 per cent to Dh19.4m.
First overseas foray
Union Properties will also venture into real estate development in Saudi Arabia though a joint venture with Naif Alrajhi Investment Company.
“We will soon sign a memorandum of understanding with the Saudi partner to set up an operating company. We will be developing on their land bank with our focus being Riyadh,” revealed company General Manager Ahmad Al Merri.
“We are evaluating a number of potential schemes, including a high-rise development. But we are not starting with it,” he said, adding, the first project was likely to be a mixed-use development.