Asteco is the largest property consultant in the UAE and managing director Andrew Chambers is a veteran of the real estate industry, having worked across Asia in Hong Kong, Manila, Singapore and Bangkok. He has lived in Dubai for six years and seen it grow from desert sands to towering skyscrapers in half a decade. But what does this meteoric growth mean for the emirate and its property market?
What is your view on the prospects for the local real estate market?
All of these are labour intensive and require quite a sophisticated property market. So the demand is high and has put the rates up into the top 10-20 countries in the world.
This is a fundamental in the market that whatever is happening today, I don't think goes away. Are we getting a leveling off of prices? We are getting a drop in the rate of increase.
So you think there will be a marked slowdown?
Yes. There will a slowdown but I can't say how much. We predicted at the end of this year and the first half of 2009, we would see a leveling off of prices in new released stock. A new tower coming on the market now is the same price as six months ago. So this is significant that we are seeing this steadying of prices. I don't think we will get a 10 percent drop in house prices by 2010, I don't agree with the Morgan Stanley report.
Construction costs, after months of rising, are now falling. What effect does this have?
You have to look at the exponential curve of the cost to build, the cost of labour and land, and the final cost to the buyer. Steel prices are dropping as we speak, so are concrete and cement prices. So we are immediately seeing a potential cooling down of inflation which is a good result for this region. As the world financial crisis continues and inflation drops here, it will stabilise the market.
Will there be sweet spots that emerge in Dubai? What areas are becoming the London equivalents of Kensington and Chelsea and the more down market areas of Peckham and Lewisham?
The places that will show growth will be the DIFC, Old Town, Jumeirah Lake Towers and some parts of Deira. Other places like Palm Jumeirah will also hold up well because they can't grow much more, there is a finite space. Where you will have a lot of the same stuff coming online is Dubailand- this may face competition.
There has been speculation recently that British expats have been selling their second homes because of doubts over the market? Is this true?
A lot have called in the last month, but hardly any have sold. We've had queries from those who bought about two years ago on the Palm Jumeirah or in Jumeirah Beach Residence who have doubled or tripled their money.
We are advising them not to jump out of the market because we are still selling properties at the top price there. British expats make up roughly 10 percent of the homeowners in Dubai.
To give a broader view, in the last four to five years, we've had speculative buyers from the UK, Ireland, Iran, India and the GCC, who have bought to ‘flip'. They pay 10 percent and hope to sell in a month or two. In the last year, however, this has changed. Buyers have been those with sufficient cash or mortgage finance to see a project through to completion. It's become a market for more serious investors.
Rents for villas and apartments have soared in the last six months. Do you think that Dubai will become such an expensive place to live that people will be put off?
It is a big negative and it is preventing some people coming here. It is preventing the numbers of people coming here that some companies would like to see. Look at architectural consultancy practices. They have brought over five people a year and put them in a villa when they would rather have bought 10 or 20. It's just too expensive