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Fri 27 Sep 2019 12:44 AM

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Opinion: why real estate had to get real

This year's Cityscape exhibition was smaller, quieter and did not have the big brash project announcements of the past, but a lot of things have changed for the better within the real estate sector

Opinion: why real estate had to get real

My first trip to Dubai was for Cityscape 2008 and things were very different then. One of the big government-backed master developers flew me over from Dublin in Emirates Business Class and I stayed in a five-star hotel near the exhibition.

Big, brash projects were still the modus operandi in the days when everyone was saying the global financial crisis wouldn’t impact Dubai.

At the event, a new 1km tall tower was announced which would be even bigger than Burj Khalifa, which was itself still called Burj Dubai and was another year away from being fully completed.

Reading back through the archives, a story in Gulf News about the 1km tall tower added that another prominent local developer was planning to go even higher and was planning to build a tower that would be, what the journalist described as, “an even more head-spinning 2.4 kilometre high”. Unsurprisingly, the report added that the developer did not confirm or deny the rumour.

Wake-up call

Those where the days when flying international journalists in from around the world on Business Class and breaking records (even ones already set within the borders of the emirate) was the norm.

Now, things have certainly changed. The global financial crisis did reach the shores of Dubai back then, and the industry still faces fierce competition, now amidst ongoing subdued market conditions that have persisted since crude prices plunged five years ago, in 2014.

A new report from real estate advisory Core said last week that rent and sales prices continued to drop across most parts of Dubai in the third quarter of 2019. Core said sales prices are forecast to remain under pressure in the foreseeable future as the market adjusts to supply and demand dynamics, with about 29,500 units expected to be delivered by the end of this year.

New laws

But not everything is the same. Yes, the big outlandish projects are no longer part of most developers’ plans and the regulators have introduced some very innovative initiatives to address the issues. There is no more burying heads in the sand believing the issues won’t impact Dubai.

On the first day of last week’s Cityscape event, the Dubai Land Department (DLD) announced a 134 percent increase in real estate transactions following the creation of the new Higher Committee of Real Estate on September 2.

With senior representatives of major developers among its members, the committee aims to avoid duplication of projects in the sector and achieve a more sustainable and healthy balance between supply and demand.

Majida Ali Rashid, CEO of the Promotion & Real Estate Investment Management Sector at DLD, said achieving sustainable balance in the emirate’s property sector remains the committee’s highest priority.

“The real estate market indicators show the maturity of an increasingly balanced sector. We have achieved a total value of more than AED1.4 trillion through 715,000 accumulative investments and 374,000 accumulative investors,” Rashid said. “In 2019 to date, we’ve seen a value of investments of more than AED56bn across 31,000 investments by 23,000 investors.”

At the same time, another regulation was introduced to help boost sales and regulate the joint ownership of real estate in the city.

The law applies to all major real estate development projects in the emirate, with developers required to submit all necessary documents of jointly owned real estate projects to the DLD within 60 days of the completion date.

The law outlines what the responsibilities are of the partners, and also states that developers cannot be part of an owners’ committee unless there are unsold units, meaning there is no conflict of interest – something many tenants and owners will be delighted with.

Warning notice

In what is perhaps a sign of the market’s challenging conditions, Dubai’s Real Estate Regulatory Agency last week warned developers and brokers not to chase investors in corridors and parking lots during Cityscape, and that violations would “incur penalties”.

While the sector may be going through tough times,we are proud to celebate those who have the ingenuity to stay the course until things, inevitably, improve and bounce back.

Shane McGinley, Editorial Director

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