Get real, Part II
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 II
October 31, 2009 6:55 by Ehtesham Shahid
In Kuwait, with prices having fallen 40 to 50 percent for land and up to 30 percent for built products, increasing opportunities are emerging for the acquisition of attractively priced assets from distressed sellers. Bahrain is also likely to see higher potential returns due to falling prices, lower construction costs and the availability of more distressed sellers.
Back in Dubai, still the most happening real estate destination, the market continues to remain lackluster. According to an EFG-Hermes report, prices are estimated to have corrected 50 percent since 2008 peak levels. “Currently, transaction activity is focused on completed properties and areas/developments that are considered prime, either due to location or proven ability of the developer to execute,” according to the September report.
It’s clear that the previous model was heavily dependent upon pre-sales and the availability of developer financing. This is no longer sustainable. A move towards models of financing seen in more mature real estate markets will be an inevitable consequence of the current cyclical downturn.
With the darkest industry clouds beginning to clear, Victor Orth’s life appears to be getting back on track. “When I had to choose between moving to Moscow or Dubai it was like choosing between freezing and frying. I chose the latter,” he says. Now, after having been through the thick and thin of the region’s real estate market, Orth doesn’t regret having seen such a sweet-and-sour story unfold from such close quarters. “It was like riding a business rollercoaster in the center of a whirlwind,” he says.