by Sim Whatley,
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word count: 520
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on the net: http://www.dubizzle.com/
UNITED ARAB EMIRATES, Apr 04 — The construction boom that was witnessed in Dubai for about six years or so was unparalleled anywhere else in the world. The fulfillment of such grandiose plans was a dream of the Government of Dubai which was also envisioned by the ruling family. The rush of building projects also brought in artificiality of prices especially with regard to villa and marina properties in exclusive locales and communities. Thus Dubai’s loss is Abu Dhabi’s gain
T
he construction boom that was witnessed in Dubai for about six years or so was unparalleled anywhere else in the world. The fulfillment of such grandiose plans was a dream of the Government of Dubai which was also envisioned by the ruling family. The rush of building projects also brought in artificiality of prices especially with regard to villa and marina properties in exclusive locales and communities.
Not surprisingly, the Dubai Land Department recorded a fourfold increase in land prices since 2000. Although this was driven in part by genuine demand, speculative investment also contributed to the price rises. In the first six months of 2008 just before the real estate meltdown, prices had shot up by as much as 25 percent. Then the inevitable happened as Dubai too succumbed to the worldwide recessionary trend that had affected many other nations. The construction sector which had exhausted all credit possibilities began to overheat- there was too much supply compared to demand, and prices began to fall. Expatriates were asked to leave as projects began to be abandoned and working contracts were canceled. Almost overnight, a lot of people lost their jobs and had to return home. Even today, Dubai is still picking up the pieces from this and the Dubai World debt repayment fiasco which followed.
Employment has reduced and so has business, as the stocks markets have seen a plunge in value. As many people left the emirate, others got the opportunity to relocate their living quarters to Dubai from neighboring emirates such as Sharjah and Ajman. Investors who do not have holding power have put up signs on the borders of their properties and advertisements in the newspapers announcing Abu Dhabi property for sale, property for sale in Dubai and UAE property for sale.
Although 2010 started on a positive note with the unveiling of the Burj Khalifa, the world’s tallest standing structure, disenchantment is once again evident as the oversupply of an estimated 20,000 units is expected to further depress prices by 10 percent from current levels.
Some of the emirate’s biggest developers have already begun implementing controls to dampen the influence of speculators on project prices. The supply-demand gap will hopefully reduce after 2010 year end and most real estate pundits are expecting a rebound in Dubai real estate by mid-2011. Once this correction takes place, the continued influx of residents should ensure that the market remains relatively stable.
So real estate values may fall by 10 percent before the correction but investors should still come out on top, as values are expected to move up by a minimum of 15 percent in the rebound, based on trends from the past.
The fallout from the construction industry has also led to some new migrant workers and expatriates willing to relocate to Abu Dhabi and other GCC countries where economic conditions are more stable. Thus Dubai’s loss is Abu Dhabi’s gain. As rents and selling prices decline in Dubai, they are picking up in Abu Dhabi, the capital state of the UAE, and other places in GCC countries.
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