DUBAI: Dubai faces an uphill struggle to revive its real estate sector that was battered by the global financial crisis, but industry reps at a subdued property fair in the once-thriving emirate see signs of hope.
At the prestigious Cityscape show — an event celebrated over the boom years for rolling out grandiose developments — major property developers displayed models of projects already completed and others that might never rise off the ground.
"For the Dubai developers, the key focus this year… is delivery and completion," said Rohan Marwaha, Cityscape’s managing director, ahead of the four-day show that opened on Monday.
The four-day show has seen the number of exhibitors fall and its size reduced for the second year in a row.
Property in Dubai has shed more than half its value since peaking in 2008 as the financial crisis dried up cash inflows and led many to walk away from their loss-making investments.
And prices are likely to continue falling for the rest of 2010 due to oversupply, property consultancy Jones Lang LaSalle said in a report this week.
But it also said the pace of decline has eased compared with last year.
"This excess supply is dampening sentiment and delaying the timing of any general market recovery," the report said.
The firm expects some 35,000 new residential units to be completed in 2010, in addition to 30,000 more in 2011, while seven million square feet (650,000 square metres) of office space are likely to be ready by the end of this year.
But while demand remains subdued as speculators, who fuelled the property frenzy over five years, are kept away by the cash shortages, some voices in the industry are starting to question the supply forecasts, saying that a lot of the projects will not be completed.
"There will be a 90 percent reduction in supply until 2020 from the peak of registered projects in 2008," Sheikh Maktoum bin Hasher al-Maktoum, the president of Al-Fajer Properties, told AFP.
The Real Estate Regulatory Authority (RERA) has already announced that 480 projects in the drawing stage have been cancelled, he pointed out, and many developers are consolidating existing projects, reducing the number of units that will eventually be built.
Meanwhile, early signs of a recovery can be found in the low prices and rental costs that are finally attracting companies to relocate to Dubai or expand their existing premises.
"The Dubai market for us has improved significantly this year. The improvement has come as a result of international occupiers coming into the market… to service the region as a whole," said Nicholas Maclean, Middle East managing director of CB Richard Ellis Real Estate Services Company.
"The absorption of space in the Dubai market is significantly ahead of where it was last year… It was miserable," he told AFP.
That comes as Dubai appeared to ease debt pressures, with its largest group, Dubai World, announcing last month it had reached a deal with most creditors to restructure 24.9 billion dollars of debt.
It also follows Dubai’s success in raising 1.25 billion dollars in a bond issue seen by many as a recovery of the emirate’s ability to tap international finance.
"We are back. Of course we are back," boasted Dubai’s ruler Sheikh Mohammad bin Rashed al-Maktoum, in an interview with Bloomberg Television last week.
But Maclean suggested Dubai needs to boost its population by creating jobs that would attract foreigners in order to address the oversupply and put a brake on the price slide. The property supply glut "is going to be an issue for many years to come," he warned.
Dubai’s population, the majority of which is made of foreign expatriates, dropped by eight percent in 2009 to 1.52 million, and is forecast to drop by a further two percent in 2010, according to Jones Lang LaSalle.
Many of those investing in Dubai property came from Britain, India, Iran and Russia and never lived in the emirate, one of seven that together form the United Arab Emirates.
To lure investments in freehold property during the boom years that began in 2002, Dubai developers promised investors UAE residency permits attached to their properties.
This promise was overturned by the authorities in the aftermath of the financial crisis, which offered only a permit to stay for six months renewable.
"That has to change, because we have got too much accommodation to be absorbed by the international community," said Maclean.
"Would you buy a house if in theory you couldn’t actually live in it?"
Al-Fajer Properties Chief Sheikh Maktoum said he believed there would be an adjustment to the immigration law.
"We need to allow people over 60 to stay in the country," he said, referring to the UAE law which requires foreign workers to retire at 60 and subsequently leave the country.
But he sounded upbeat about the prospects for recovery. "We have reached the bottom," of the cycle, he said.