Dubai has cancelled 202 property projects and won’t allow developers to start new ones without funding them in advance as it works to control supply, the head of the Emirate’s real estate regulator said.
“We are putting in a proper plan to watch over supply,” Marwan Bin Ghalaita, chief executive officer the Real Estate Regulatory Agency, said in an interview Tuesday. Developers requested 115 of the cancellations, which took place since late 2009, he said.
About 33,000 new housing units will be added to Dubai’s market by this year, exacerbating a vacancy rate of around 40 percent, Colliers International estimated. Property prices have fallen by almost 60 percent after banks curtailed lending and speculators left the market.
The regulator, known as RERA, has developed new criteria to evaluate developments that were under way when the financial crisis hit, Bin Ghalaita said. It’s cancelling projects where little or no construction has taken place or where buildings are far from city infrastructure.
Projects in which the majority of buyers were speculators and have ceased payments or those owned by developers who can’t show they are capable of finishing the work are also being stopped or delayed, the RERA chief said. He wouldn’t name specific projects.
Dubai’s property market, where home prices surged 79 percent from 2007 to mid-2008, is “back where it should be and is currently attractive to end-user investors,” he said. Potential buyers can expect yields of as much as 12 percent a year by leasing out housing units after the decline in prices, the he said.
Many investors continue to pay on properties they bought before the crisis because they believe they are making a good long-term investment, he said.
“There are some investors or speculators who made bad decisions and now they want to back up,” Bin Ghalaita said. “But the majority of investors, as long as their project is progressing, are paying and need their properties.”
Nakheel CEO Chris O’Donnell has said Dubai’s oversupply of real estate will take five years to clear. Do you agree?