Realistic plans ‘key to Dubai property market’
Dubai, November 29, 2012
The key to the success of individual real estate projects in Dubai and the future performance of the overall market will be the adoption of a realistic phasing strategy in line with market demand, said an expert.
“We are definitely seeing a return in confidence to the Dubai real estate market,” said Alan Robertson, CEO of Jones Lang LaSalle Mena, a global real estate services firm.
“This is still Dubai and it’s as ambitious as ever but we are also seeing a more mature and considered approach which is only going to benefit the long term health and credibility of the real estate sector amongst domestic and international investors and stakeholders.”
There are clear signs that the Dubai economy is recovering on the back of the 3T’s of trade, transport and tourism, with the Dubai Statistics Centre releasing new figures that show real GDP growth of 4.1 per cent over the first half of 2012, marking the fastest growth rate since early 2008.
Encouragingly, there are also indications that some of the lessons of the last real estate crisis have been learned, Robertson said.
The most important of these is the need to adopt a long term and coordinated approach, rather than developing too much real estate too quickly. Providing this proves to be the case, then the recent announcements can be seen as a positive for the market in the long term, he noted.
“Indications of the change in tone and temperament include a greater degree of co-ordination between developers; adherence to the recently approved Strategic Planning framework for Dubai; more emphasis on phasing with most developers recognising that major developments will need to be built over a much longer timeframe of between 10 to 20 years, and lastly a recognition that major demand generators need to be developed ahead of other components of mixed use projects,” said Robertson.
It is now recognised that attractions and anchor tenants must be developed first, in order to generate demand for other components of the project, he added.
Another factor to consider is that not all of the announced projects are likely to attract funding, he pointed out.
Banks remain wary about lending to real estate developments at a time when they still have to make major provisions against nonperforming real estate loans from the last development boom.
“Our soon to be released 2012 Real Estate Investor Sentiment Survey (REISS) shows that investors also remain cautious, preferring completed income producing projects than development plays or land,” Robertson said.
“Given the understandable reluctance to rely so heavily on ‘off plan’ sales as in 2007/8, the level of available finance is likely to act as a natural anchor, limiting the number and timing of the announced projects that proceed.” – TradeArabia News Service