Announcing it doesn’t make it happen: Dubai
Given the number of major real estate announcements over the past few weeks, one could be forgiven for thinking that we were back in 2006 and 2007 again
December 3, 2012 4:48 by M. Aldalou
Yes, we realise that the announcement of Dubai’s super-duper-mega project, also known as the MBR City, has caused both the national media and their readers to go on two separate but equally powerful paths. One is the path of positive positivity, where the words ‘positive’ and ‘Dubai’ are more inseparable than a pair of honeymooners. The other, a path of absolute dismissal.
The first group – let’s call them the P group – are adamant about spreading the glow of the emirate’s booming industries. Nothing can hold them back and no amount of evidence will change their mind. When they ask ‘is Dubai back’ they either mean it rhetorically, expect a yes or no answer or don’t want one at all.
Now, Kipp hates to be the bearer of bad news (okay, we love it) but the fact of the matter is; it’s nothing at all like asking whether Santa is coming this year. It’s an open-ended question and anyone who thinks otherwise really shouldn’t read any farther than this. Okay, you still should.
Jones Lang LaSalle has put it perfectly for us. They say they have received so many inquiries over the recent real estate announcement that they decided to draft a specialised statement to address it.
“Given the number of major real estate announcements over the past few weeks, one could be forgiven for thinking that we were back in 2006 and 2007 again,” the statement notes.
Kipp is glad to see that JLL are more forgiving than we are because countless experts have said that no matter how strong the progress is, the days of 2006 and 2007 are over. And that’s not necessarily a bad thing. We need a new and mature start and Alan Robertson, CEO of JLL Mena happens to agree.
“We are definitely seeing a return in confidence to the Dubai real estate market,” he says. This is still Dubai and it’s as ambitious as ever but we are also seeing a more mature and considered approach which is only going to benefit the long term health and credibility of the real estate sector among domestic and international investors and stakeholders. The key to the success of individual projects and the future performance of the overall market will be the adoption of a realistic phasing strategy in line with market demand.”
Notice the words ‘return’, ‘mature’ and ‘realistic’? They are all strong indicators of working in phases and with a lot more caution than what would we had seen a few years ago.
‘There are also indications that some of the lessons of the last real estate crisis have been learned,’ the statement continues. ‘The most important of these is the need to adopt a long term and co-ordinated approach, rather than developing too much real estate too quickly. Providing this proves to be the case, then the recent announcements can be seen as a positive for the market in the long term.’
Another factor to consider is that not all of the announced projects are likely to attract funding. Banks remain wary about lending to real estate developments at a time when they still have to make major provisions against nonperforming real estate loans from the last development boom.
Given the understandable reluctance to rely so heavily on ‘off plan’ sales as in 2007/8, the level of available finance is likely to act as a natural anchor, limiting the number and timing of the announced projects that proceed.
Just remember that actions speak louder than words. In our personal lives we can adopt all the positive attitudes in the world. In fact, it’s healthy and recommended. Don’t get too carried away though, into thinking that calling something positive actually makes it so.