Weekly Dubai real estate news digest. Issue 47

Moving forward with caution
Welcome to the forty-seventh issue of Market Insight, your weekly guide to what's happening in the Dubai real estate market.
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MARKET INSIGHT. Weekly guide to Dubai's property scene
Issue 47 |  May 25, 2014

Moving forward with caution

There's no denying the growth spurt that Dubai is caught in.

New real estate projects are coming up, whether prices weaken through a market correction or not. Developer margins are high, over 50% and project pre-sales - 30-50% - is enough to fund the completion of an entire development, says Standard & Poor's (S&P).

However, property companies are taking a more conservative approach this time around. "They are typically launching new developments on a pre-sold basis so they would only launch once they have sold enough to fund the construction work and that is not difficult when you have margins of 50% plus," says Tommy Trask, director, Corporate Ratings, S&P.

Developers are also making sure that a buyer is committed to an at least 30% payment before he can think of selling. "We have provisions in the SPA that restrict sales until two installments are paid," says Rahail Aslam, CEO of Select Group. "In addition, there are Oquood registration fees of 4% - this is another safeguard for developers to ensure they are principally dealing with end-users and long-term investors." Earlier this week, Damac Chairman Hussain Sajwani also voiced the strong opinion that developers are doing their part in cooling growth down to more manageable levels.

In order to meet the vast demand, competition among UAE banks is heating up, resulting in lower interest rates, discounts and special offers. Despite the lowering mortgage rates, most transactions seem to be carried out in cash as the Central Bank data shows that the country's mortgage sector has remained stagnant over 18 months.

"We foresee an acceleration of real estate lending as developers launch new projects and more local and expat customers seek to enter the mortgage market," S&P analysts wrote in a recent report. 

Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. While there definitely seems to be an uptake in development and investment, there also seems to be an air of caution from the part of all parties involved. Developers have learnt to shy away from investors looking to flip property to make quick money while mortgage restrictions ensure that buyers have the funds needed to make an investment. Trump was also seen remarking that while he may not have thought the same a few years ago, he now believes in the city's upside potential. "The numbers have a long way to go before they catch the number of years ago...today they have tremendous control, checks and balances and people doing them are putting in their own checks and balances. I think Dubai has tremendous upside."


Pashma Manglani


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Dubai real estate only going up: Trump 

US property tycoon Donald Trump believes property prices in Dubai are slated to go up as they are still far below their previous peak.

"The real estate in Dubai is going one way...it's going up. These numbers are much lower than the numbers from years ago prior to collapse," Trump, chairman, The Trump Organisation, said during the launch of  a clubhouse and 104 Trump Estates villas in Dubailand.

He clarified that while he may not have said so earlier, he now believes in the "upside potential" as the time is now "different and smarter."  

Read more on Emirates 24/7

Smart city with air-conditioned pathways 

Dubai Municipality has announced plans to build Desert Rose, a smart sustainable city in the shape of a desert flower after it was approved by His Highness Sheikh Mohammed bin Rashid Al Maktoum, vice president and prime minister of the UAE and ruler of Dubai.

The project will be located between Al Ruwaya and Al Aweer across the Emirates Road. The city will adopt sustainability standards in terms of economic, social, cultural and environmental factors. 

Poised to become a residential area, the city will include various sustainable housing areas with general services and facilities and a city centre which will connect to Dubai Metro through an electronic train track.


Read more on Emirates 24/7

Banks to get more involved in realty market 

More than a quarter of banks' loan books relate to the property market, a level that is likely to creep up in the coming years, Standard & Poor's estimates. 

The ratings agency has been examining the level of banks' exposure to the property market as it assesses the potential impact on lenders of any correction in property prices.

"The key thing for us that will determine banks' performance in the next two years is their participation in the real estate story," said Timucin Engin, director of financial institution ratings at S&P. "Despite the very significant real estate increases over the last two years, we haven't seen a necessarily significant amount of credit growth. Banks have been a bit more conservative than they were in the past."

S&P said that banks remained "highly exposed" to the sector although some indicators showed their risks had been pared down. Loans to the property sector represented about 122% of banks' total equity at the end of last year, down from the peak in 2008 when they represented 150% of their total equity.


Read more on The National

Dubai's twisting tower named among world's best

For years, Dubai's striking Cayan Tower (or as previously known, Infinity Tower) stood incomplete against Sheikh Zayed Road, its seemingly futuristic helix shape prompting tourists to snap selfies against its curves.

Last summer, the world's tallest tower featuring a 90-degree twist has been named one of the world's top recently completed skyscrapers at an award's ceremony for high-rise architecture. The 75-storey building, located in Dubai Marina, was honoured at the annual Emporis Skyscraper Awards for projects of more than 100 metres in height completed last year.


Read more on The National

Developers put the squeeze on speculators

Dubai's developers have got a firm grip when it comes to speculators and off-plan purchases - making sure a buyer is committed to an at least 30% payment before he can think of selling.

It was the master developers who first started with stricter requirements but from the second half of last year, things have changed. 

"Dubai has experienced a surge in sales during the last 18 months with substantial volume transactions recorded at the Land Department...in some cases we had seen prices increase by 40-50% within 12-18 months," said Rahail Aslam, CEO of Select Group, which launched two upscale tower projects since the start of the year.

"It's comforting to know the market has not continued in this fashion and is taking a needed pause." A slower pace of property value growth and buying activity is exactly what the market needs now, allowing developers to focus attention on seeing the project through its construction phases without the distraction of having to see how those properties are faring in the secondary market. 


Read more on Gulf News

New beachside project in Maritime City  

Deyaar Development, a Dubai Financial Market-listed developer, has inked a deal with Dubai Maritime City to acquire 70,226.53 square feet of land located at the Marina District within the zone.

The Marina District includes a cluster of mixed utility spaces, as well as a marina facility that is available for the charter and transit of yachts. The Marina District has been conceptualised as a leisure and entertainment hub within the zone, featuring a wide selection of restaurants, a four-star hotel, waterfront retail outlets, and other community amenities. 

Read more on Emirates 24/7

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