DUBAI: Dubai’s property sector is making a strong comeback five years after prices in the emirate nose dived, but a surge in demand and bouncing prices have triggered calls to remember the crisis.
Scale models of grandiose developments rolled out at the three-day Cityscape property show, which ended yesterday, showed the renewed confidence in a market that shed around half of its value.
But Ali Lootah, chairman of Nakheel, the giant developer behind a clutch of landmark projects in the Gulf emirate including its famous palm-shaped man-made islands, was bullish.
“Dubai is booming again,” he said. He was speaking as Nakheel launched a new seafront development on reclaimed land, along with a handful of residential projects. “We have a lot of people moving to Dubai. Dubai is back in business, and I’m not really worried about speculations,” he said.
Speculation on the market pushed property prices to record highs before sending them tumbling during the global financial crisis. Dubai’s property market grew rapidly during the five years before the crash as the sector became a magnet for foreign investors.
But foreign financing dried up when the global financial crisis hit the sector, just as it struck the heavily-indebted government-related companies, while the economy contracted in 2009 and 2010. Dubai has weathered the debt crisis, leaning on its robust trade, tourism and transport sectors, although the city-state still carries a large burden of debt exceeding $100bn.
Its economy grew 3.7 percent in 2011 and 4.4 percent in 2012, and is expected to expand by 4.1 percent this year. Some residential property has bounced by about 20 percent, said Alan Robertson, chief executive officer for the Middle East-North Africa region at Jones Lang LaSalle property consultancy.
“We think prices will continue to grow quite quickly over the next 12 months, but over the next 24 months we will see the rate of growth slow down,” he said, adding that prices were still 20 to 30 percent below their 2008 peak.
“We think that this is an initial burst of growth which will settle down as the pent-up demand we have experienced is satisfied.” He said his consultancy predicted that “the market will reverse into a more sustainable growth in prices”.
Robertson warned against getting carried away by signs of recovery, but said he was cautiously optimistic for the future.
He did not foresee another bubble burst because of “a number of key differences,” highlighting a recent decision to double sales duties to four percent, in an attempt to curb flipping.
“This will take a bit of steam out of the market place,” said Robertson, pointing to demand from end users, including Arab investors sheltering their money in Dubai away from their countries that have been rocked by the Arab spring uprisings. AFP