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Get real, Part I

Get real, Part I

With the grinding halt of the real estate rollercoaster, exhilaration at the prospect of a ‘fast buck’ is over. What’s next for the industry? Part I.

October 27, 2009 3:15 by

Clearly the days of flipping and fleeing are long gone. In the words of Raffaele Semonella, an associate analyst at Moody’s Middle East, the return to early 2008 levels is unlikely. “Market oversupply is expected to remain or even exacerbate, thus limiting any possibility of such a drastic recovery in residential prices,” he says. According to Semonella, property lending on a large scale is expected to remain stable or grow moderately. “Ultimately, we will see more realistic prices across all asset classes.”

Analysts such as Semonella believe a number of key events are likely to shape the sector in the medium term. “There has been consolidation between two key players, Dubai Holding’s real estate activities and Emaar, which could allow the newly created entity to have greater control of the market and benefit from economies of scale.” The proposed consolidation would mean a combined asset base of 194 billion dirhams ($53 billion) and combined external debt of 13.4 billion dirhams ($3.64 billion). It is believed that the opening of Dubai’s Metro could help stabilize the decline in prices particularly in those areas with easier access to the new public transport system. However, oversupply and buyers’ delinquencies are expected to continue to negatively impact revenues and cash-flow generation.

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