Dubai's crashed property treads recovery path

Dubai's property sector, which went into free fall when the global financial crisis hit, looks like it might be on a path to recovery, with prices starting to bottom out and a few developers daring to roll out new projects. At the annual Cityscape Global show, which served over years of property frenzy as a launchpad for grandiose projects, a handful of developers displayed scale models for seaside and desert developments to test the appetite of the market. The three-day international show began on Tuesday. "We have seen demand increasing since the beginning of 2012," said Mohammed al-Khayat, commercial director at Meydan Group, owned by Dubai ruler Sheikh Mohammed bin Rashid Al-Maktoum, as he unveiled proposed new projects. Hadaeq (Gardens of) Sheikh Mohammed Bin Rashid is planned to stretch over around 5.09 million square metres (54.8 million square feet) and is slated to feature neighbourhoods like "those found in the English and French countryside and the Japanese gardens of the East," the company boasted in a statement. Another of Meydan's projects is the Meydan Tower, a new "vertical community" with a combination of offices, retail, serviced residential units and a hotel.But the proposals remain at a concept stage. The group, which built the emirate's grandiose new Meydan Racecourse as part of its Meydan City in the middle of the Gulf emirate's desert, sold 40 percent of 63 plots for signature villas in less than a year recently, Khayat said. "The market is picking up... There is a heavy traffic of tourists. Many from Saudi Arabia," he said, adding that many tourists with time decide to buy secondary property in Dubai. The increase in visitors could be behind a new seaside retail project that broke ground recently and is being built by Meraas, another developer owned by Dubai's ruler. When the global financial crisis hit Dubai in 2009, bringing to a grinding halt work on many projects, Meraas shelved a number of larger-than-life projects announced shortly beforehand. Since 2009, Dubai's regulatory authority RERA has cancelled more than 200 projects and imposed new rules to control supply as the sector still struggles to reduce vacancy rates. This time round, Meraas revealed its plan for The Beach retail centre that will occupy the last empty plot in the upmarket district known as The Walk, which sits on the shores of the Gulf.Property prices in the glitzy emirate took severe beating when the crisis hit, shedding more than half of their peak values registered in mid 2008 after five years of breakneck-speed growth fueled by speculative investments. But investors are back on the look and have pulled prices up in different areas. There is also talk around town that people escaping Arab Spring countries, mainly Egypt and Syria, have pushed prices up by choosing to move to the stable emirate. "We do see a recovery. It is a selective or partial recovery and certainly not across the market," said Craig Plumb, head of Middle East and North Africa research at Jones Lang LaSalle property services firm. He said demand for offices remains stagnant, while the residential, retail and hotel sectors have bottomed out and are in the recovery stage. He warned, however, that recovery depends on the quality of assets and cannot necessarily be expected across board. "It is not for every asset, but for the best-quality projects in each of those classes," he said. The company said the purchase prices of apartment units in prime buildings went up four percent in the third quarter of 2012 from a year earlier, while rental rates were up five percent. But prices of villas jumped 23 percent year-on-year and are expected to continue their upward trend in prime areas, it said in a report. Reports said that prices of villas stand now at Sales are now concentrated in ready units, contrary to the situation before the crisis, when off-plan property was selling like hot cakes on day of launch. High-end signature projects appear to be an exception and already attracting investors. Last month, the giant developer Emaar launched a new Address hotel, featuring also residential apartments. It is in Downtown Dubai, where the world's tallest tower, Burj Khalifa, and one of the world's largest shopping centres, Dubai Mall, are located. The units were sold out in one day. But Plumb warned developers against becoming overly optimistic about recovery and launching projects that are not economically feasible. "There is always a room for new projects, but we are a bit concerned that people are getting carried away. There is still a lot of supply in the system and it is still coming on. I think a new project has to be very well targeted at a particular niche," he said. "We do hope they won't start until they have about 60 percent pre-sales," he said, speaking of projects announced at Cityscape. He said hoped that "lessons of the previous boom have been learnt."