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Thu 12 Nov 2009 03:42 PM

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'Slow recovery' seen for UAE construction sector

UPDATE 1: Report also says Mideast likely to see shift from luxury to affordable homes.

The global construction market will not recover until 2011 and the downturn will continue to impact the sector in the UAE into next year, experts predicted on Thursday.

In the long term, annual growth in the UAE market was likely to be between five to six percent over the next decade, according to the Global Construction 2020 report.

The report, compiled by Global Construction Perspectives and Oxford University’s Oxford Economics, added that the global construction market was worth an estimated $7.5 trillion, representing 13.4 percent of global gross domestic product.

It predicted that, by 2020, global construction would grow by 70 percent to reach $12.7 trillion and in the Middle East and North Africa (MENA) region, emerging nations such as Nigeria, Morocco and Egypt will experience the highest levels of growth.

The UAE would see “a slow return to residential property construction over the coming years alongside continued development of infrastructure,” it forecast.

“From our perspective we see a downturn happening this year and bit into 2010 but that downturn is nothing as steep as other developed markets, like the US example,” Mike Betts, a consultant at Global Construction Perspectives, told Arabian Business when asked about the UAE market.

“We can see how that market will pick up in two to three years time. It is time to get rid of excess stock and get some stabilisation in prices and then things will pick up,” he added.

He believed that over the next decade the UAE would see growth rates of five to six percent.

This would not be as strong as other emerging markets in Africa or Asia, he said, as the boom times in 2006 and 2007 did not take off as much as they have in these markets.

A recent report by Proleads, a Dubai-based research firm, reported that 69 percent of construction projects in the UAE worth $657 billion were still active.

However, Betts said the word ‘active’ was ambiguous and indicated that the projects were not cancelled or on hold but did not indicate if or when construction was scheduled to take place or if the project was simply dormant.

The downturn in the global construction industry during the period 2007 to 2009 had been extreme, he added.

In developed countries this has caused a slump in annual construction output of over $650 billion, more than the entire output of the construction industries of both Germany and the UK combined, or more than four times the size of construction output in Russia.

“The key thing is that the last time there was a construction crisis in the Middle East in the 1970s it took 20 years to recover from and the message of this report is that it is a pretty serious construction crisis, but we think partly because of the support from infrastructure it will take two to three years to recover, not 20 years and won’t be as strong as then either,” Betts said.

He said the Middle East region would move away from luxury housing and towards more affordable units over the next decade.

“We expect there to be an increase in more affordable housing, rather than higher profile you seen in Dubai for example,” Betts told Arabian Business.

Betts predicted that across the region affordable housing would become more in demand, especially in areas like Saudi Arabia where there was still a critical lack of housing supply.

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