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The property wheel

The property wheel

Investors are holding back, assessing the impact of the global crisis on the region. And although their caution is affecting the local market, it’s important to remember that investors haven’t fled. They’re still here, watching the wheel go round and round…

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November 3, 2008 10:03 by



Ehtesham Shahid

If Cityscape is a barometer of Dubai’s property market then it failed miserably this time around. The yearly real estate bonanza may have hosted 70,000 visitors – compared to 51,000 last year – with huge projects announced in between, it may have witnessed closing of several mega deals, but it still could not give a conclusive indication of which way the market is headed. That is precisely what most industry watchers and investors wanted to know. On the contrary, it betrayed the emotions otherwise being felt by the industry. For all practical purposes, this year’s Cityscape was another endorsement of everything that Dubai’s real estate stands for – new projects, iconic developments and collectively defying the odds. If the “overall atmosphere was not as frenzied as in previous years,” so what?

Well, these are not normal times. And that means things are more prone to change now than it ever was in recent times. The financial crisis that is looming in the background goes beyond the supply-demand equation and the rising cost of construction and manpower issues. It goes to the heart of what has been fueling this market – funding. The UAE assessment report of the International Monetary Fund (IMF) says the size of the banks’ balance sheets in the UAE has increased markedly in recent years on the back of strong lending to the real estate and equity markets. “At end-2007 total assets were 866 billion dirhams ($250 billion), with deposits of 588 billion dirhams ($168 billion),” it says. With things changing drastically on that front and a credit squeeze staring on everybody’s faces registering similar figures next fiscal is going to be an uphill task.

But when the going gets tough, the analysts come calling. “Slower not Over”, that’s how EFG Hermes chose to describe the situation following the close of Cityscape Dubai 2008. “The fact that the event saw a record number of visitors depicts strong overall interest, while the anecdotal evidence of a slower pace of sales activity points to a more cautious buyer base,” says the investment bank’s sector flash note. The good news is, according to one estimate, by 2010, roughly 90 percent of all real estate transactions in the UAE will be end-user driven.



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