By Andrew Sambidge
New report sees shift away from new homes being built and increased sector transparency.
Dubai's real estate sector will see a shift from asset creation to asset management in 2010 as it looks to rebound from the impact of the global economic downturn, a new report from Jones Lang Lasalle has said. The emirate's property market, which has seen prices plummet by up to 50 percent over the past year, will also see a "greater emphasis on corporate governance and transparency", the real estate consultancy said in its Global Market Perspective study. "Given the current oversupply in many sectors, we will see a shift this year from asset creation to asset management as the market moves into a period of more controlled and regulated growth," Jones Lang Lasalle said. The report added: "We also expect to see a greater emphasis on corporate governance and market transparency, with the increased recognition that improvements in these areas are no longer optional but essential in avoiding the uncertainties that surrounded the recent debt restructuring." Last week, a research note from UBS said that prices could drop a further 30 percent from current levels by the end of 2011. It also predicted an oversupply of up to 150,000 residential units in Dubai by the end of next year, with total supply hitting about 360,000. In a special comment on Dubai in JLL's new global report, the research company said that this month's opening of Burj Khalifa, the tallest built structure in the world, marked "the end of a transformational decade in Dubai real estate". The report added: "As part of its ambitious plans to establish Dubai as a truly global city, the government embarked upon a hugely ambitious program of both physical construction and legal / regulatory reforms. The fruits of this investment created a thoroughly modern and efficient city, but have also resulted in a burgeoning level of debt (conservatively estimated to be in the range of $80 to $100 billion), primarily from infrastructure and real estate projects." JLL added that the move by Abu Dhabi to offer Dubai financial support in December provided "firm evidence of the unity of the main states, in the United Arab Emirates".
The demand for middle and lower income housing is still huge. But all developers concentrated on the high end apartments market ignoring the reality. In the population spread, workers, lower level staff and middle level executives account for the majority. This is were the acute shortage was felt from 2005 onwards. A worker's room in labour camp ad-measuring 160 square feet fetched a rent of Dh. 4500 per month. Translated into rent for a villa of 3200 square feet, it would work out to a massive 1,080,000 annual rent. In other words, if permitted, it would have been cheaper to accommodate workers in posh villas! It was the same in case of a one bedroom flat fetching more than 100,000 rent in a good area. The irony is being felt now with the so called high end flats & apartments quoting progressively lower rents! Same is the case with the labor camp with room rents coming down to 1900 per month (still very high) and yet so many remaining empty. Every one is hoping that the managements of assets would be taken up by corporate entities (instead of the current system of poor service, callous attitudes and sub-standard quality). The changes that are absolutely essential would include monthly rent payments (instead of the 1,2 or 3 cheque Post-Dated-Cheque system), prompt return of the security deposits at the time of vacating the property, reasonable upkeep and adequate security. The heady growth of Dubai (and all other emirates) also meant tremendous stress for all by way of traffic snarls, rent increases, school fees increases, less savings potential and more medical bills. All of us fondly hope that this beautiful place (to work and live) bounces back. regards, Raj