Dear Dubai Real Estate—Get Real.
Contrary to recent reports about Dubai’s real estate resurrection, the property sector is facing problems far worse than dry swimming pools and empty pockets.
June 24, 2012 3:55 by Priyanka Pradhan
A new survey by Friends Provident International has revealed that real estate is re-emerging in Dubai and investors are returning to the ailing sector. However, other news of debt-ridden Dubai developer, Nakheel, draining swimming pools over a service fee dispute with owners in the esteemed Palm Villas property, throws a wet blanket over the survey’s sunny disposition.
This new survey is part of the steady stream of reports and insights that speak of Dubai’s real estate resurrection. Last week, the Oxford Business Group (OBG) also claimed that the Dubai’s residential sector has “posted solid growth over the past few months.” Recent talks about a potential merger between the two real estate heavyweights, Aldar and Sorouh might also have injected some confidence in industry watchers, as has the report showing profits posted by Nakheel in Q1 of 2012.
We hate to be party poopers but the fact remains that the two property developers are considering a merger only to combat the massive over supply of properties, combine resources to avoid further losses and stay afloat in these difficult times. Also, the debt infested Nakheel has posted profits only as a result of heavy cost cutting as well as property hand-overs, and not necessarily due to a happy truckload of new investors, as real estate lobbies would have us visualize.
Add to that, there’s another concern over poor quality of construction, a problem that could be bigger than that of over-supply. A recent news report revealed that the poor quality of construction in Dubai stems from lack of proper controls, a desire to build quickly while minimizing costs and poor property management after buildings are handed over. If not addressed, this issue can give Dubai a stinking reputation that will be difficult to shake off, in the long run.
Property watchers know that there is no stampede of investors for Dubai’s properties, just yet. Having said that, there is Dubai’s real estate market is naturally buoyant right now, which is bound to happen to any sector that hits rock bottom. But at this delicate time, Dubai will only benefit from reports and insights that show the true picture of the situation. Doses of self injected optimism and overvaluation will only prevent the Emirate’s property sector from rising above the rubble of 2008’s devastation.