85% believe real estate sector woes will get worse

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PROPERTY VIEWS: A majority of Arabian Business readers believe the real estate sector will continue to struggle in the global slowdown, according to the results of an online poll. (Getty Images)

A large majority of Arabian Business readers believe the worst is yet to come regarding the global economic situation's impact on the real estate sector in the Gulf, according to the results of an online poll.

More than 80 percent of respondents see things getting worse before the recovery comes with more than 60 percent of those fearing a major property price correction is just around the corner.

The views come as major UAE developers cut jobs and announced the scaling back of some of their projects as the global economic crisis continues to impact in the region.

On Monday, Palm developer Nakheel admitted it was reviewing a number of projects and would scale back work on some of them while Emaar, the Gulf Arab region's largest property developer by market value, said last week it was reviewing its jobs policy in light of the global financial turmoil.

Their comments followed the announcement by Dubai-based Damac that it was cutting 200 jobs and Omniyat Properties which also said it was cutting back, with 60 jobs thought to be lost.

And the results of our poll suggest people believe more job cuts and project announcements are still to come.

Sixty-three percent of respondents said investors needed to be prepared for a major price correction in the real estate sector while another 22 percent thought more companies would be forced to cut jobs as the slowdown continued.

Just 10 percent of people who voted thought the worst of the economic crisis was over for the region's property sector and that the recovery would now start.

A further five percent agreed that things would not get any worse for real estate developers but cautioned against plans to invest in a property.

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READERS' COMMENTS

PROPERTY PRICE CORRECTION
Posted by Padmanabhan, Dubai, United Arab Emirates on Sunday 23 November 2008 at 17:19 UAE time


Sir

The property price correction is a long overdue issue. Particularly now with the construction cost dwindling with almost 50% drop in price of key building materials, it should happen right now. Ir you may estimate the cost of construction per square feet, you could appreciate the enormous profit that sector has been taking. With overseas investors getting western markets opened up with cheap property prices and also the potential to get permanent visa to stay in their possession, the interest in the ME properties should come down. With the alarm bell rang with the financial crisis, even the few expatriate workers who might have planned to take properties here will now back track. So it will really be mostly the gulf buyers who will invest in properties and in that case prices will have to be sensibly in line with potential cost of construction with rational value escalation. The earlier it happens, the better it is as the property market then will start to perform again.

Worse yet to arrive
Posted by Profit Proof, dubai, uae on Friday 21 November 2008 at 16:59 UAE time

The real effect in UAE will be felt in the first quarter of 2009. The real estate will hit the floor and you will have lots of building stuck half way through next year. So better sell and sit on cash. Even cash will devalue once the hoarding of USD stops and it will move to the next asset class GOLD.

It will get much worse...
Posted by brandaid on Thursday 20 November 2008 at 14:26 UAE time

Guys, think about it...85% of the buyers are non GCC expatriates. In any other market people either have to rent or buy because there is no choice, but here, over 85% of the population can leave and go home. The fundamentals are very very bad! Banks aren't lending and when the next financial quarters figures come in in Jan 2009, you will see a major disaster here. The economy is fueled by construction which is fueled by speculators investing in the market, no speculators, no construction, no money overseas, no tourists, no tourists, no shopping, Dubai will be back to what it was in the 1990s. only about 5% of the population earn enough money to afford to buy properties in Dubai based on their income, but since they have to come up with about 40-50% down to qualify for a loan this number will shrink to about 2%. The best example is the California Gold Ruch in the 1880s, how many thriving developments turned into Ghost Towns over night. Would you rather buy property in a country where the vast majority of people HAVE to live there or a country where the vast Majority can just leave? Established markets are a safer bet, but to anyone left in the place who's job doesn't revolve around construction, real estate, tourism, hospitality or retail, rent will be cheap, because there will be masses of place available, either through desperate landlords or through banks (after forclosures).

Expect the Unexpected...
Posted by Mohamed Maricar on Wednesday 19 November 2008 at 22:26 UAE time


I read an article about a year and half before in GN, where the author who was an analyst closed his statement by saying 'expect the unexpected'.. I think we still haven't seen the unexpected part of the Real Estate industry boom.

And in simple economics they say 'everything that goes up, comes down'.. so we have seen the rents go up, due to demand driven by construction and real estate boom. But now that we have all these properties (free hold) ready and no buyers, we can see them being rented-out at a more reasonable rates (unlike Aed 250K-350K p.a. for a 2-3 B/R aprtmt in Abu Dhabi).

And don't blame the news.. they are just trying to create a 'Feel Good' factor among the citizens and residents.

Only my opinion..

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