Dubai developers used Cityscape to gauge investor sentiment

Dubai developers used Cityscape to gauge investor sentiment
Visitors looking at an Omniyat project model at Cityscape Global 2015 in Dubai.

In a reassuring sign, several developers announced infrastructure upgrades to existing projects - Nakheel's Palm Promenade in Palm Jumeirah and Premier Inn Hotel in Dragon City being a case in point.

By Deepthi Nair

Published: Wed 16 Sep 2015, 12:00 AM

Last updated: Wed 16 Sep 2015, 11:40 AM

After all the euphoria of Cityscape Global 2015, it's back to business now for the real estate industry. The three-day event did witness a few major property launches, but nothing much to write home about. Given how the exhibition is a testing ground for overall investor sentiment, did it live up to its hype of returning in a bigger, better format?
Some of the major launches at Cityscape or in the week leading up to it were The Villages in Dubai South, Jebel Ali Gardens by Nakheel, the Viridis apartments and Bugatti Villas by Damac Properties, The Residence Collection in Al Habtoor City, 1JBR by Dubai Properties, Sharjah Waterfront City and villas at the Al Zorah project in Ajman.
In a reassuring sign, several developers announced infrastructure upgrades to existing projects - Nakheel's Palm Promenade in Palm Jumeirah and Premier Inn Hotel in Dragon City being a case in point.
"The lack of major new mega launches was one of the most reassuring features of Cityscape 2015, showing the market has become more mature. This is a very positive sign. Many of the new launches were not new at all but merely the re-launch of previously announced schemes," said Craig Plumb, head of research at JLL Mena.
"Dubai has matured as a market and is still maturing. Big launches, typical of fast growing emerging markets are now less common. Authorities and developers are more focused on human scale developments, quality of life for residents, rather than just the 'bigger is better' approach that was more common several years ago. That approach was needed, and is still required in some measure, to put Dubai on the global map," said David Godchaux, chief executive officer (CEO) of Core Savills.
Although affordable housing was billed as one of the predominant themes of Cityscape Global 2015, the launches didn't exactly live upto the definition of 'mid-income' homes.
As per a JLL report, there are over 820,000 middle income households, representing almost 40 per cent of all families in the UAE. However, only 22 per cent of the 19,500 residential units launched to date in 2015 are affordable to this sector of the market. Therein lies the fact that a majority of the market is out of sync with reality.
Expensive land
"We are in great need of middle-income housing developments in the UAE, but so is it for the rest of the Middle East. Unless we have sufficient affordable housing, the prices of existing units will keep rising, making them out of bounds for the common man. The major developers were tied up with lands in prime locations until now. That obliged them to have high-end projects," said Dounia Fadi, CEO, Elysian Real Estate.
"You need both affordable and luxury properties in a market like Dubai. However, building affordable housing should be a short and long-term priority for Dubai to retain its mid-income residents who are looking at ownership opportunities as rents continue increasing," added Godchaux.
Meanwhile, several project announcements by developers were intended to gauge market sentiment and will not break ground anytime soon. Other developers were happy to merely showcase existing projects in all their glory.
"While some developers have launched high-end projects, most of these are only likely to materialise into actual developments if they can be sold in advance. Very few developers are starting work on new projects without achieving certain levels of pre-sales. Most have become very concerned to phase future projects in line with potential demand. As always in Dubai, there are more launches than project starts," added JLL's Plumb.
According to Godchaux: "Massive projects selling off-plan will find it more difficult to convince buyers who still have in mind some of the disastrous stories of the last crisis. Less than a handful of developers in the UAE now have the clean reputation needed to bring massive off-plan projects to the market with the level of confidence required by serious prospective buyers."
"Most of the major projects were just being showcased and not ready to be sold. Developers were trying to get a feel of how the investors will respond to all these mega projects during a softening of the economy," Elysian's Fadi added.
Even as serious investors bide time for UAE property prices to soften further, the developer fraternity is going full steam ahead with project launches, adopting a long-term view. With the Expo 2020 a few years away, it seems safe to assume that the only way forward is up north.

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