Dubai Real Estate Market Poised To Shine

source propertyfundsworld

With the recession almost out of sight, global investors are keenly eyeing Dubai for real estate investments, given the emirate's phase of relative stability in prices and affordable housing.

In a positive upturn, the latest results from the Dubai House Price Index from Colliers indicate that real estate prices in Dubai have risen almost seven per cent in the third quarter of this year from the previous quarter.

"The results indicate a bounce in the market and are an indication of an excellent recovery," says Tej Kohli, real estate investor and founder of Ozone Real Estate.

As a long-term analyst in real estate, Kohli is of the opinion that stability in real estate prices is set to be steady from this point on. Given the fact that real estate prices are moving towards more reasonable levels, now is the time to strike the iron as the market enters a new stage that will help the transition into reformation.

The most encouraging sign in the Colliers report shows that transactions increased by 64 per cent in the third quarter. To add to the rising real estate boom will be a host of new launches and openings within the emirate.

By mid-December this year, the world's tallest tower, Rose Rayhaan, is set to have a gala opening, which will dot the skyline along Shaikh Zayed Road. Following shortly, the five-star Jebel Ali Golf Resort and Spa will re-open after a comprehensive renovation.

Kohli says: "With a host of projects slated to launch along with the opening of a spanking new airport, Dubai has plenty on its plate to silence the critics and welcome its investors."

In addition, a slew of high-end hotels, including The Conrad Hotel Dubai and a second Ritz Carlton, are also on track for an early 2010 opening. The Palazzo Versace Resort and new hotels opening on the crescent-shaped The Palm Jumeirah in 2010, including the five-star Ottoman Palace by Rixos, boasting the world's largest Turkish bath, will follow immediately. Close on its heels will be the launch of the five-star Royal Amwaj Resort & Spa.

The much-awaited Jumeirah Golf Estates will start operating in late 2009 and 2010 as Dubai's prime golf-themed real estate evolution. Moreover, a half an hour drive from Dubai International Airport, Tiger Woods' Al Ruwaya resort is also set to commence in 2010, boasting an 18-hole championship course.

"The slew of launches goes to show that Dubai is well on track; with global visitor numbers up four per cent for the first half of 2009 compared to the same period last year," adds Kohli.

RERA projects construction updates in Dubai

source Go Wealthy

Almost three quarters of property developments in Dubai have made construction progress despite the economic slowdown, according to preliminary data from the industry's regulator. Of 552 projects, more than 72 per cent showed some construction progress, while 17 per cent were "stalled" and 11 per cent were "delayed", according to the latest data from the Dubai-based Real Estate Regulatory Agency (RERA), which is undertaking a study to map construction progress across the emirate.

The RERA launched a review of 1,108 off-plan developments in the emirate in February to try to increase transparency and trust in the property market. It has already completed reviews of about half of the total, according to its website.

The survey would help the RERA decide which projects fitted into which category,. Under the review, called the independent progress monitoring report, each project is rated from 0 to 5 for its construction progress, with 5 being complete. The RERA website displays a coloured arrow for the speed at which a project is moving along. A green arrow denotes the project is progressing according to schedule, while an orange arrow means the project is advancing according to a new schedule approved by the RERA. A red arrow means it is delayed and a black symbol means the project is stalled.

Foreigners eye Dubai hotel property market

source Emirates Business 24/7

Many foreign investors are showing interest in the Dubai hotel property market and could benefit from opportunities after Ramadan, said a senior executive.

"Though the number of transactions in Dubai is still low there is a lot of interest among investors in properties here," Amine Hamdani, a Vice-President at specialist real estate consultancy CBRE Hotels, told Emirates Business. "Many foreign investors are looking at Dubai with interest. CBRE has identified about 12 interesting hotel properties in Dubai. Five are operational and the others are newly developed.

"The hotels, which all have more than 120 rooms, are in the range of $60 million (Dh220m) to $200m each, depending on the location."

Hamdani said investors were looking for income-generating and operational hotels in good locations. Newly developed hotels or those in the pipeline were of less interest to international buyers.

"It still makes sense to invest in the hotels market across the region and several opportunities are available for cash-rich investors. Very few hotel investment deals have happened as the industry in this region has been dominated by developers, not investors."

He said two types of property were available. The first was a hotel run by a multinational chain in a good location with attractive cash flow. The second was a hotel that was badly managed, in a poor location and needed improvements to its operations and facilities.

"The first type would attract investors looking for a good level of return without operational inputs who would be able to benefit from the expertise of the management company, the brand and the current cash flow. The likely investors are real estate funds, pension and government funds, hotel funds, holdings targeting diversification and banks.

"The internal rate of return for this investment would be above nine per cent. The other investment would attract investors with a higher risk profile or hoteliers targeting poorly performing properties."

Hamdani said earlier estimates indicated that 65,000 new hotel rooms would be needed in the next seven to eight years, but because of the economic crisis the number of extra rooms in the next five years would be just 22,000 – about 30.8 per cent of the forecast. The market has been hit by adverse conditions in the real estate market as several mixed use developments that included hotels have been stopped or delayed.

"This pattern will be reflected throughout the GCC hotel industry, resulting in a much lower supply than was predicted by investors, consultants and other interested parties.

"On the flip side, during the past four years developers have been investing in the hotel industry, attracted by hotel yields, high earnings before interest, tax, deprecation and amortisation margins, diversification purposes or just for prestige.

"In the next four to six years the institutionalisation of the hotel industry and the emergence of a strong investment market will see more foreign buyers looking for long-term opportunities and will close the door to a large portion of short-term players, though some will remain and have a role in bringing back liquidity," he said.

$930bn-worth projects underway in the UAE - paper

source Emirates Business

A total value of nearly $930bn-worth projects in the construction and other sectors are underway in the UAE, according to a report.

The Emirates Business reported on Friday that the UAE is carrying out projects in construction and other sectors with a total value of nearly AED3.4 trillion, which is around 45 per cent of all projects planned in the Gulf.

Quoting a Kuwait National Bank (KNB) study, the daily said that the combined value of projects planned or being carried out in the GCC totalled around $2.1 trillion (AED7.7 trillion) at the end of the second quarter of 2009, more than four times the estimated value of projects in June 2005, an annual growth of nearly 50 per cent.

Quoting the Meed project database, the bank said in its 10-page report: “The UAE accounts for by far the biggest share of project activity, totalling around $929bn and affirming its position as the leading GCC country in attracting capital investment. Some 81 per cent of the UAE projects are in the construction sector.”

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"Indeed, the construction sector dominates in every GCC country, though to a lesser degree… while the total value of projects in the UAE is far higher than anywhere else, Saudi Arabia has a much larger base of non-construction related projects – some $224bn, which is 28 per cent larger than in the UAE. This probably reflects the larger size of the Saudi economy in absolute terms, necessitating a greater degree of industrial diversification.”

Emirates Business noted that according to the study, the higher value of non-construction-related projects in Saudi Arabia stems largely from the petrochemical, power and utilities sectors. At a combined $127bn, the value of the Kingdom's projects in those sectors is about 35 per cent larger than in the UAE, it said.

"The overwhelming balance of non-construction-related projects in other GCC countries comes in the oil and gas, power and utilities sectors, with the latter reflecting the region's growing domestic power needs," the study added.

Property prices up on Dubai Metro route

source Arabian Business

It’s not due to open until September, but Dubai Metro is already starting to affect the city’s property prices with homes near stations selling for more money.

Flats in Jumeirah Lakes Towers (JLT), close to stations on Sheikh Zayed Road, are selling for 6.5 percent more than units further away, reported The National.

“For residential [sales] we’re seeing a higher demand because of accessibility to the metro, but this is only for properties situated almost directly outside a station,” said Michael Michael, the sales director of Landmark Properties.

Related: MAP: Dubai Metro Red Line

Related: Dubai Metro fares revealed

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Several other agencies told the daily paper that more people were enquiring about flats within walking distance of metro stations.

This is a positive sign for Dubai’s real estate market, which has had a difficult year with the prices of flats and villas plummeting by 34 percent, according to the Landmark Advisory.

The true extent of the metro’s effect over house prices will only be felt after the Red Line is up and running from September 9, some property experts said.

Andrew Delport, the head of property management at the Dubai-based property portal Gowealthy.com, said units near the metro would recover first.

He added that for the rental market, the metro would have the biggest effect on prices in Dubai Marina.

“With the metro on the Marina side of the freeway – you’ll definitely see the impact.

“If you look at the movement there, the tenancies, it’s much more vibrant than other places, and it’s good value for your money.

“It’s plateaued out and you’ll see rents there reacting to the metro, possibly more than anywhere else.”

Prices of residential property at the top end of Dubai's real estate market have bottomed out

source Zawya

Prices of residential property at the top end of Dubai's real estate market have bottomed out and are now witnessing increases of between 20 and 40 per cent, a roundtable discussion between realtors and developers organised by Emirates Business has shown.

"Iconic" locations such as The Palm Jumeirah and Downtown Burj Dubai are at the forefront of this revival, they said.

"We are seeing increased activity from potential buyers who want to buy luxury properties, since prices are currently hitting bottom," said Mohanad Al Wadiya, Managing Director, Harbor Real Estate.

"Last week we sold a one-bedroom apartment in Downtown Burj Dubai with a Burj view for Dh2.1 million, which was going for about Dh1.7m to Dh1.8m in December 2008."

Average prices for signature villas on The Palm Jumeirah were in the range of Dh9 million to Dh17m in Dec-ember last year, but now are up in the range of Dh12.5m to Dh19m, according to Wadiya

Jose I Murcia, Associate Director, Group Seven Properties, said luxury residential prices have stopped declining, but luxury commercial properties are continuing to see a drop in prices. "Locations such as Down-town Burj Dubai and The Palm Jumeirah are iconic and with the prices falling it does make an attractive proposition for buyers," he said.

Mohammed Zaal, Chief Operating Officer, Al Barari, said prices have fallen in the luxury segment, but not significantly. "Our prices reduced by as little as 20 per cent from their peak last year, since most of the demand for our properties is from the end-users.

"People who are willing to put money into high-end, or luxury properties are long-term investors who want

to remain invested even during recession. These individuals do not need financial backing and are willing to put forward whatever is needed if it means that they will get the level of quality they are looking for in their homes."

Property firm sees 24% rise in UAE rental deals

source Arabian Business

UAE real estate agency Better Homes on Sunday revealed that its number of rental transactions during May were 24 percent higher than in the same month in 2008.

The company said the increase in business was part of "some positive results" over the past two weeks, where both general enquiries and transactions were on the rise, following a sharp dip in recent months amid the impact of the global financial crisis on the UAE.

Following an Open Day event last weekend at its Jumeriah Beach Residence branch, Better Homes said it recorded an "overwhelming response" to its summer offers of inventory for sale and for rent.

Related: UBS sees Dubai property prices falling 40%

Related: Dubai house prices 'may never return to 2008 peaks'

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Billy Rautenbach, director of operations, Better Homes, said: "The positive result indicates that despite the recent market downturn, if the right product is offered to the client at the right price, at the right time, there is a good opportunity to transact units within both sales and leasing."

Her comments came amid gloomy predictions from UBS and Deutsche Bank last week which predicted that house prices in the UAE still had some way to fall before hitting the bottom.

UBS analysts predicted a further 40 percent drop while Deutsche Bank feared prices would fall by up to another 20 percent.

But Rautenbach remain upbeat, adding: "Our number of leasing transactions is looking very positive. In May this year, we executed 24 percent more leasing transactions than in May 2008."

With talk in the market of mortgages becoming available soon, Better Homes said it expects to see continued success in leasing and see an increase in property purchases sooner than expected.

"As soon as lending becomes available at a wider scale, we expect to see a rise in sales transactions," added Rautenbach.

Funds fuel property recovery

source The National

ABU DHABI // Investment funds focusing on distressed property are forming in the UAE, helping to solve some of the problems caused by disputes between developers and investors that have hit tower builders’ cash flows.

Their emergence has coincided with a recovery in prices in some parts of Dubai and Abu Dhabi, raising hopes that the property market may have turned the corner after a sharp downturn.

“The arrival of these funds marks the beginning of the upturn in the market,” said Hamish Walton, a partner in the financial services practice at the law firm Clyde & Co in Dubai. “I think the market in many ways has already hit the bottom. These transactions will be the first signs of recovery.”

Distressed asset funds could help get cash flowing for some projects and protect investments at a time when the market has slowed to a near standstill, Mr Walton said.

Many buyers, especially of off-plan properties, are reluctant or unable to keep up with instalments because of the downturn in the economy. Developers cannot build their towers without cash, leaving the two sides in disputes that are playing out in the courts and in the offices of bodies such as the Real Estate Regulatory Agency in Dubai.

Tariq Hameed, a director at Access Consulting, said his company, along with an as yet unnamed global partner, was planning to launch a distressed property fund in about two weeks.

The fund, called Special Opportunities Scheme for Dubai Real Estate – or SOS Dubai Real Estate – would aim to raise US$250m (Dh918.1m) in several tranches.

“The market is in a very, very difficult situation today,” Mr Hameed said. “People are stuck in the real estate market and they have no way out. This fund would help some of these situations.”

The fund would target property that was well on its way to completion, and investors who had paid at least 50 per cent of the purchase price.

Instead of buying the property outright, the fund would take over the payment plan and ownership from the original buyers and offer them a certificate of investment equivalent to the value they had paid so far for their unit, Mr Hameed said.

Then it would use money put into the fund by retail investors to pay the remaining instalments on the property. The fund’s investors would get a fixed return on their investment, as with a bond, with the option to convert their stake into equity. After a period of years, the apartment would be sold off, giving the original buyer back their stake money plus, it is hoped, some interest on top, and the fund’s investors their return.

“The basic assumption is that prices will rise in five to six years to a point where home owners get their principal amount plus interest,” Mr Hameed said. “It also opens investment to individuals who have an appetite to play the real estate game, but do not have an equity stake in properties.”

Andrew Charlesworth, the head of corporate finance advisory at Jones Lang LaSalle in Dubai, agreed that the arrival of distressed asset funds could be a signal that the market is in the final part of its decline.

“When you get pricing that is dropping by 30, 40 or 50 per cent, there is an investment group that takes that quite seriously,” he said. “The expectation is that pricing will reset back to historic norms at some point. Sophisticated investors recognise that you never know when you are at the bottom, so a lot of people buy when the trend is still slightly downwards.”

Mr Charlesworth said his company was in discussions with foreign institutional investors and regional sovereign wealth funds about opportunities to make distressed asset investments.

In some cases, these could be bridge or mezzanine loans issued directly to developers who could not get bank financing to finish the final stages of a project, Mr Charlesworth said. Projects that are still raw land, have not started construction or are in the very early stages are attracting little interest, he said. However, the arrival of investors in distressed assets was adding certainty to the market, which was in turn improving sentiment and pushing the market “in the right sort of direction”.

Deyaar Development, a major builder of towers in Dubai, is planning to launch its own distressed asset fund in the next few weeks, although the fund would focus solely on defaulted property among its own properties. After a buyer defaults and loses part or all of their investment, Deyaar would sell the unit at a discount to the fund. The fund, which would range in size between Dh500m and Dh1 billion, would hold on to the unit until the market improves and then resell it for a profit, the company said last week.

Dubai real estate on road to recovery

source Zawya

Although cash and confidence issues still prevail, Dubai's property market will witness the first green shoots of recovery sometime between the end of 2009 and the second quarter of 2010, according to a panel of industry experts speaking here today (Tuesday 2 June) at the third 'not for profit' Cityscape Connect business breakfast,

Attended by more than 100 property executives, legal advisors and investors, the industry forums were initiated to stimulate networking, transparency and open debate on the key issues affecting the Dubai real estate industry which although experiencing a dramatic reversal of fortunes, is now showing signs that the market is stabilising and prices are beginning to bottom-out.

Elaine Jones, CEO of Dubai-based real estate agency Asteco echoed the sentiment of the panel: "It's about cash & confidence. For example, we need to reduce interest rates, relax lending criteria and address the residency visa issue. This will at least start to bring back much needed confidence to the market and begin to stimulate growth."

Indeed investor confidence was debated at length, examining numerous issues such as defaults, incomplete projects, late payments and fraud. "Trust is strained," stated Sunil Gomes, of Guru Real Estate. "Credibility is king, if we lose that we have nothing. Projects must be completed and investors better protected."

Steven Henderson, Partner in legal firm Clifford Chance, agreed that trust was paramount but added that the law had previously been struggling to keep up with the rapid growth of the market and that an over regulated market might have an adverse effect and stifle growth.

"Dubai has introduced Escrow accounts and the Strata law, but a federal law for real estate would also help to restore confidence. Banks also have a role to play here especially when developers experience credit or cash flow problems" he said.

Difficulties in the banking sector have been widely reported, however, the panel agreed that although credit was available for exceptionally low risk customers, besides rates and approval ratings, the sector needed consistency.

"Historically, the region has practiced 'relationship lending' but now with the credit crunch, banks are more cautious and have raised their minimum lending criteria especially for real estate projects. They can no longer just use the project as security they often also require ring-fenced assets independent to the project as security."

However despite industry issues the panel was optimistically cautious about the timescale for recovery. Asked when Dubai could expect a market recovery, the general consensus was sometime between the end of 2009 and the second quarter of 2010.

"This clearly shows that industry sentiment has moved into positive territory and it is equally important that Cityscape through the Connect series of events continues to provide a platform for open debate. As the largest real estate event brand of its kind in the world, it is crucial in these times of economic uncertainty that Cityscape remains a trusted brand, giving back to the industry that it supports," said Rohan Marwaha, Managing Director of the Cityscape

Moderated by Bob Hird, Senior Director and Head of Investments at CB Richard Ellis, other industry experts on the panel included, David Macadam, Director of Commercial Division at Better Homes and Shahram Shamsaee, SVP Shopping Malls, Majid Al Futtaim Company.

Cityscape Connect is an initiative of Cityscape, the real estate service brand that has achieved international recognition and success. Cityscape events are held in Dubai, Singapore, Abu Dhabi, New York, Mumbai, Moscow, Saudi Arabia and Latin America. Cityscape events attract key industry figures such as international investors, property developers, governmental and development authorities, leading architects, designers, consultants and senior professionals involved in the property industry. Furthermore Cityscape has also established Cityscape Intelligence, an online subscription based service for real estate professionals, Cityscape Datamonitor, a real estate research consultancy, and the Cityscape magazine.

UAE civil projects worth $698 billion ongoing

source Al Bawaba

Despite the negative impact on the United Arab Emirates of the global economic crisis, work on civil construction projects worth $698 billion continues to move ahead.

But the downturn is taking an increasing toll with more than half of all civil construction projects across real estate, infrastructure, leisure and entertainment now on hold, according to a detailed report published today, (8th February 2009).

“The UAE may no longer be the land of milk and honey but it is still in a far better position than most," said Emil Rademeyer, director of Proleads Global, the Dubai-based publishers of the first in-depth investigation of its type. "To put it into perspective, the $698 billion of continuing work we are reporting is almost equivalent to the latest stimulus package proposed for the United States."

The report by the Proleads research house into the state of the industry is the most extensive and up-to-date yet carried out in the UAE and examines projects across real estate, infrastructure, leisure and entertainment, as well as projecting the state of the industry for 2009.

The Insights investigation concludes that 52.8% of the total current civil construction project portfolio of the UAE, worth a combined total of $582 billion, is now on hold while a further $698 billion remains in operation. It also finds that while numerous real estate projects are scheduled for completion in early 2009, the rate at which projects are being completed has slowed down.

Largely driven by a frenzied real estate sector in Dubai, the UAE construction industry has seen five years of unrelenting growth but the global financial crisis has cast its shadow. Property prices are falling and jobs are being cut.

The report recognises "potential trouble" if the rate projects go on hold increases further but nevertheless sees a "resilient industry" in terms of cash flow levels at a time of global recession.

“It is this resilience that will eventually see UAE construction through to better times," said Rademeyer. "The US economy took the world into recession and it will ultimately lead the global economy out of recession. I can see the UAE benefiting during the second quarter of 2010. We refer to this as a ‘dormant opportunity’ in the survey."

The Proleads report suggests, however, that the UAE has yet to feel the full effects of the global economic crisis. Since December 2008 Proleads has recorded a sharp increase in the rate at which projects have been placed on hold across all sectors of the industry. Real estate was the hardest hit with projects of all sizes being placed on hold.

"Within the real estate sector, it is likely that we will witness more deferred projects throughout 2009 as will be the case, but to a lesser degree, within the infrastructure sector," the Proleads report says.

Explaining the need for the investigation, Rademeyer said: "Until now, debate on the state of the UAE construction industry has been based mainly on anecdotal evidence. For example, it is vitally important to know how fast and by how much the industry is changing, not just for the industry and its suppliers but also for planners, governments and financial institutions.

"Projects have always been put on hold for whatever reason even during times of prosperity, but it is the rate at which they are placed on hold that enables us to predict when the upswing will start,” added Rademeyer.

The Proleads investigation encompasses 1,289 projects in real estate, including residential, commercial and retail buildings; infrastructure, including roads, railways, bridges, ports, educational and healthcare facilities; and leisure and entertainment which covered sports facilities, theme parks and hotels. Carried out on information correct as at mid-January 2009, Proleads Global claims its data analysis has 90% accuracy.

It found that at mid-January, real estate projects continue to account for a huge 84% total of the $1.28 trillion total budget; compared with only 8% each for both the infrastructure and leisure and entertainment sectors.

Commenting on the future for the UAE construction industry, Rademeyer said: "It is in times of economic turmoil that one finds industries in transition between prosperity and recession before returning again to prosperity and this is indeed the case in the UAE."

Dubai Spending $10 Billion Fund, Sees Economy Stable

source Bloomberg

April 9 (Bloomberg) -- Dubai has begun disbursing a $10 billion fund it raised to battle the impact of the global credit crisis and its economy is past the worst of the danger, the Persian Gulf emirate’s top finance official said.

“We are talking about big sums here,” Nasser Bin Hassan al-Shaikh, director general of the Department of Finance, said in an interview late yesterday. “The bad days are over” for the economy, which is stabilizing and will gradually recover.

Economic growth in Dubai, the second-biggest of seven states that make up the United Arab Emirates, slumped after the worst financial crisis since the 1930s hurt its property, financial services and tourism industries. The emirate’s economy may contract between 2 percent and 4 percent this year, Standard & Poor’s Ratings Services said in a report March 17.

The economy still expanded in the first quarter, al-Shaikh said. In February, Dubai sold $10 billion of five-year bonds to the U.A.E. central bank, part of a $20 billion medium-term note program, to help state-affiliated companies struggling to raise cash. That money will be used to meet payment shortfalls and repay loans, the government said Feb. 25.

“Most of the support will be offered to the property” companies since they are the pillars of Dubai’s economy, al- Shaikh said. The Department of Finance will announce an overall figure for funds paid out and approved for disbursal “very soon” but not the companies that have received help, he added.

Adviser Appointed

Earlier this month, Dubai hired investment bank N.M. Rothschild & Sons Ltd. to help construct the support fund.

Dubai’s economy is “beginning to stabilize and with further policy measures to restart credit growth, I expect the economy to start recovering in the second half of the year,” Marios Maratheftis, regional head of Gulf research at Standard Chartered Plc, said in a statement today. Maratheftis forecast Dubai’s economy would expand by 0.5 percent this year.

Real-estate prices in Dubai may decline a further 20 percent after falling 34 percent from their peak last year, EFG- Hermes Holding SAE, Egypt’s biggest publicly traded investment bank, said March 29. The drop follows a five-year boom when prices quadrupled, helped by new laws allowing foreigners to own property and a growing expatriate workforce. Falling property prices increased the risk of defaults on home loans.

The government will “encourage consolidation” of Dubai’s real-estate companies, but will not force them to combine.

Property companies

Emaar Properties PJSC, which is building the world’s tallest tower in Dubai, Nakheel PJSC, which is developing palm tree-shaped islands off Dubai’s coast, Dubai Properties LLC, Tatweer Dubai LLC and Sama Dubai LLC, are some the state-backed developers that led Dubai’s construction drive.

The U.A.E. and five other Gulf Arab states enjoyed an economic boom as oil prices surged and governments invested in real estate and industrial projects to diversify their economies. The six Gulf countries, including Saudi Arabia, Qatar and Kuwait, pump almost a quarter of the world’s crude oil.

Dubai and its state-owned companies borrowed $80 billion to fund the emirate’s transformation into a regional financial and tourist hub. They need to repay $10 billion of loans in the remainder of this year, Standard & Poor’s said March 17.

Abu Dhabi, Dubai’s neighbor and the U.A.E.’s capital, invested a combined 16 billion dirhams ($4.4 billion) in the emirate’s five banks in February to buffer losses.

Al-Shaikh said Dubai’s Department of Economic Development is preparing a separate plan to support the emirate’s small and medium-size companies, which may include setting up a fund.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

Too Big to Fail

source Newsweek

The emirate can do better than survive. Vision got it to where it is, and now vision will carry it through.

The recent gala opening of the Atlantis hotel on Dubai's Palm island gave one a strong sense the emirate's elite were fiddling while Rome burned. The sheets had hardly been stripped from the beds of the departing guests when the hotel's developer, the government-owned Nakheel Properties, announced that it was cutting 15 percent of its workforce. Dubai's economy, fueled by high oil prices and easy credit, has been hit hard by the same global contraction that has already hurt much of the world. But reports of Dubai's demise are premature, and those primed to write its obituary should hold fire.

First off, Dubai is just too big to fail. It is the second-largest economy in the United Arab Emirates and retains the backing of the largest, Abu Dhabi, which holds massive oil reserves of nearly 100 billion barrels and has a sovereign wealth fund in excess of $1 trillion. It's never been clear exactly how much of the boom in Dubai, which has no oil of its own, was subsidized by Abu Dhabi. Dubai officials insisted they did it all on their own. Whatever the truth, it's fair to say that Dubai is too important to the U.A.E. for its leaders to let it fall.

Until a few months ago, Dubai was well on its way to achieving its goal of $108 billion in GDP by 2015. Now it's embroiled in the global credit crisis, which has threatened the main source of its growth: construction and real estate. Dubai relied on easy financing to build the world's tallest building, its largest mall and any number of other grandiose projects. Then came the credit crunch and demands that payments be made on a multibillion credit facility. Dubai has been forced to turn to Abu Dhabi for help.

But that's something its big brother can provide. When oil was at $147 a barrel, Abu Dhabi's production of 2.7 million barrels a day earned it cash at a rate of $140 billion a year—not bad for a U.A.E. population of slightly more than a million. Now that oil's hovering below $50 a barrel, the revenue might fall to $45 billion a year—but that's still not bad for a population of slightly more than a million. Abu Dhabi's budget for 2009 predicts oil at $67 a barrel. Even at that rate, the government would reap a substantial surplus, and most experts predict that the price will actually be much higher by the end of next year.

All this means Abu Dhabi can well afford to support Dubai. Though no one has said so publicly, many believe that the ruler of Abu Dhabi promised to backstop Dubai's obligations for up to five years. That matters, but so does the fact that compared with many other parts of the world, and contrary to some reports, Dubai is not exactly overleveraged. With estimates of $80 billion in debt against $350 billion in real estate, even if the value of the property drops sharply, Dubai will never approach the levels of debt relative to assets that now afflict the United States and parts of Europe. Direct government debt in Dubai is about $10 billion on a GDP of about $65 billion. That's much lower than that of the United States, most of Europe or Japan. And most of Dubai's debt is owed by the corporate sector, which, though linked to the government, is nonetheless legally distinct.

It's not just Abu Dhabi's money that supports Dubai; so does that of much of the non-Western world, which has looked to Dubai as a haven from, and alternative to, the U.S. banking system. Dubai is also buoyed by commerce from parts of the globe that don't have an easy time dealing with the West, ranging from countries like Pakistan to Malaysia to the Philippines.

Still, Dubai's need to turn to its oil-rich neighbor has led to a crisis of confidence in what was, until recently, a swaggering society, and there's now plenty of fear that all those dreams and plans will end in tears. The risk is less that Dubai's finances will fail than that its bold vision will get lost in the same fog of anxiety that's blanketed so much of the world.

But the region, if not the world, still needs Dubai. Until a few months ago, the emirate was heralded as a shining example of the new Middle East, a turbocharged entrepreneurial place that offered a sharp contrast to the chaos and religious sectarianism of Iraq and the corrupt crony statism of Egypt. Backed by oil or not, Dubai sees itself as a bastion of the free market and a city of modern laws and modern mores in a region where those are in short supply.

Its boom may have been built largely on real estate—offices, golf courses and condos, mainly for foreigners, mostly from Arab states. But Dubai started its growth with a vision to became a global commercial center. That attracted capital and immigrants. Alongside Dubai's 200,000 citizens live 1 million expats, and for the foreseeable future, they have no better haven anywhere in the Middle East.

Unless Dubai and its endlessly innovative ruler, entrepreneurs and developers adjust their vision and once again approach their challenges as problems to be solved rather than absolute impediments, they may well sink into a prolonged period of stagnation. The fact that it can draw on the surrounding wealth of an oilrich world will probably insulate the emirate from the worst. But Dubai can do better than survive. Vision is what got Dubai to where it is, and vision is what will carry it through.

Sustained demand will drive Dubai real estate sector growth, says Alabbar

source Emirates News Agency
Domestic demand for real estate in Dubai continues to outstrip supply and has positively shifted towards an end-user market, said Mr Mohamed Alabbar, Member of the Dubai Executive Council; Chairman, Emaar Properties and Co-Chairman of the World Economic Forum's Global Agenda Summit.

Alabbar was addressing the closing plenary of the Summit, co-hosted by the Government of Dubai to deliberate on nearly 70 issues of global significance.

He said that the Dubai Government is keenly monitoring the property market and a high-level committee has been exploring several initiatives to boost market confidence.

"His Highness Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President and Prime Minister of the UAE and Ruler of Dubai, inspires us to see opportunities in the face of crisis. The UAE has been one of the most alert economies in the region, and one of the first movers to address the crisis. We did not adopt a wait-and-watch attitude. We faced the challenge with an alert mind and open heart." ''The Government is committed to creating stronger transparency and confidence building measures. This will also prompt us to revisit our development pipeline to ensure that demand remains robust," he added.

In response to the global financial sector turmoil, the UAE Government is injecting AED120 billion into the country's financial system to bolster liquidity and strengthen the financial system, Alabbar said, adding that the Government has also announced guarantees on customer bank deposits.

He said that the real estate sector's growth was Dubai's answer to the demand created by traditional sectors such as re-exports and trading; tourism and retail; transportation and logistics; manufacturing and the free zones. "A majority of the investments in real estate is equity or cash-driven, unlike other markets, which are predominantly mortgage-driven. This takes out a lot of risk from the system." Allaying speculations on the debt situation of Dubai, Alabbar said that Dubai's asset base outstrips the debt several fold and that it is further addressing the debt position by also focusing on a central debt management system both for the Government and state-owned entities. "The Dubai Government borrowings were for Government institutions or State-owned entities that have been generating positive cash flows and long-term value, as opposed to supporting consumption." He said that the Government of Dubai is fully covered to service its debt for the next seven quarters. "Our debt services our long-term, risk-free infrastructure development programmes. We believe that a solid infrastructure is the runway for strong, future growth." He indicated that the Global Agenda Summit will pave the way to create a new socio-economic agenda for the world. "The participants in this Summit come from over 68 countries and all continents - a testament to Dubai's position as a global city and a meeting point for a variety of opinions. The participants proposed insightful, actionable ideas. Ideas that can change the way governments function, businesses operate and families live." The Summit, co-chaired by Professor Klaus Schwab, Founder and Executive Chairman of World Economic Forum, evaluated nearly 70 issues that the world faces today - from the financial sector turmoil to climate change, poverty eradication and sustainable development.

"From the farmer in Vietnam, to the school boy in Kenya to the bright university student in Cairo - every cross-section of the society, all over the globe, stand to gain from the global agenda this Summit will set," said Alabbar.

The recommendations of the Summit will be presented at the World Economic Forum in Davos next year. Dubai has been chosen to be the venue for the Annual Global Agenda Summit for the next several years.

Real estate market in Middle East is on a roll

source Economic Times

Most countries the world over have been hit by the current global economic crisis and real estate markets too have been facing a slight slump. But the Middle East has proved to be an exception from this order. While US and Spanish markets crashed after years of boom, Europe has been registering some decline, Africa is only showing growth in specific pockets and India facing a slow down. Middle East clearly is the fastest growing property markets in the world today.

According to Shailesh Tiwari who is working with a management consultant in Dubai, "Between 2001 and 2007, the real estate market here has grown 15 times over. There was a bull run especially in the last six to seven years, owing to changes made in property ownership rules, availability of land, low property prices compared to many developed countries and high rental returns. Also, the other major factor is the low interest rates at six to eight percent which is spurring growth. Residents of countries which have been politically unstable are investing a lot in Dubai because if you own property here, you are a resident for 99 years."

Dubai leads the pack as the area where development is taking place at a rapid pace. Following closely behind are Qatar and Bahrain owing to availability of gas. The inflation on rentals is in the order of 20 to 25 percent. The Middle East property market is primarily driven by the speculative investor. In fact, as soon as a renowned developer announces projects, bookings are done. A big brand is a huge draw and top brands include the likes of EMAAR, NAKHEEL, Damac, Omniyat, Al Fajer , Deyaar, Al Barrari, Tameer, UP, ETA, D.E.C.LLC and MAG Group have many takers. The buyers / investors hail from all over the world such as India, Pakistan, USA, UK, Europe, etc.

So what is it that makes Dubai so attractive to foreigners? According to Julieta Lazarova Kitova, a Dubai based property consultant, "The annual residential returns currently range from 10, 15 and 20 percent depending on the area. Dubai Property prices are low compared with other developed countries. Also, there is no income tax or capital gains tax applicable on property sales or rentals in Dubai. There is no stamp duty, legal fees on freehold property in Dubai - apart from a 1.5 percent land registry fee on completion. Rental income from Dubai Real Estate is presently between eight to ten percent."

The prime areas in Dubai which are selling like hot cakes include Dubai Marina, Dubai Waterfront, Down Town, Burj Dubai. Also popular are Jumeirah Lake Tower, Jumeirah Beach Residence, Business Bay, Greens, Sillicon Oasis, and Arabian Ranches. The lowest prices are available in International City.

Typically the size of a studio apartment in Dubai is around 450-550 sq ft, one bedroom apartment 750 sq ft, two bedroom apartment ranges from 1100-1300 sq ft, three bedroom apartment is between 1400-1700 sq ft and four bedroom apartment ranges from 2200-2300 sq ft. The unit price of these apartment ranges from 1500-3000 Dirhams per sq ft, depending on location and amenities. According to property broker Khalid from Sana Real Estate in Dubai, "The average real estate value in Dubai is 2000 Dirhams per sq ft. Earlier the range was 1000-2000 Dirham per sq feet and now it has escalated to 1500-3500 Dirham per sq feet in just a year and a half's time."

Villas and townhouses are also a rage - a 2 bedroom villa of size 1800 sq ft is available for three million Dirhams. Villa sizes go up to 7 bedrooms for w h i c h the app r o x i - m a t e costs can be15-20 m i l l i o n Dirhams.

UAE money supply rises by $51bn

source Gulf News

DUBAI: The UAE's monetary supply surged by more than 187 billion dirhams ($51bn) during last year, Central Bank data shows.

Over period, the figure rose from 505.64bn dirhams to 692.4bn dirhams, in a move considered to be the fastest monetary growth rate experienced by the country in five years.

"The expansion of industrial, logistical and real estate sectors, coupled with huge economic and real estate progress in the region, in addition to ascending trade revenues and rising current accounts, due to commercial transactions, plus various other facilities, has contributed enormously to the huge liquidity flow into the country," Sahara Group chairman Dr Ahmed Al Samerai said.

"This flow was accompanied by the addition of several different foreign capitals for investment which exceeded $19bn in 2006 alone. This led to an increase in liquidity which keeps flowing into the country as a result of several important factors that are driven by high petroleum revenues."

Construction boom spurs 15pc rise in steel prices

DUBAI: Steel prices in the UAE have risen about 15 per cent so far this month as a construction boom in the GCC oil exporter has drained the building materials market, traders said yesterday.

A tonne of reinforcing steel bar (rebar), used in construction, fetched around $1,550 yesterday, up from around $1,350 in the last week of June, dealers said.

One executive from a Gulf steel producer said he expected prices to hit $1,650 a tonne by the end of the month.

The rising cost of building materials is helping fuel inflation across the Gulf.

The GCC is investing heavily in real estate and building material suppliers are struggling to keep up with demand in the UAE.

"Prices of steel and other construction materials have not eased, even for a single week, since the beginning of the year and I don't see any signs of a downward trend," one Sharjah-based trader said.

"What we have now is limited supplies of steel, higher demand from construction contractors and costs of manufacturing steel at origin are going up due to inflation in these countries," he said.

Global rebar consumption reached 218 million tonnes last year. Around 65pc-70pc of consumption comes from the Middle East and Asia while the highest consumption per capita is in the UAE.

The total value of civil projects in the Gulf is estimated at around $1.5 trillion, and demand for housing is expected to soar on robust population growth, particularly in Saudi Arabia, analysts have said.

Gulf rebar consumption was expected to reach 14m tonnes this year, a 13pc increase from last year, they added.

"Every producer in the region is trying to increase output to meet demand from the construction sector and our imports bill is increase everyday on inflation," a steel trader said.

Towering success

DUBAI: Abu Dhabi's Tameer Towers project has won top honours at the CNBC Arabian Property Awards 2008. Tameer's Abu Dhabi flagship development received Best Development, Best Property, Best Architecture and Best High-Rise, Best High-rise Developments and Best Developer Website awards. Tameer Towers won honours in each of the categories into which it was entered, having competed against a multitude of other outstanding developments. Entries were judged by a panel of experts whose collective knowledge of the property industry is second to none.

Tameer Abu Dhabi managing director Dr Abdallah Shaaban said the awards honour the endeavour to produce an international landmark, the product of an intensive design and development process, to lift the benchmark of luxury and innovation in the region.

"Tameer Towers was developed to exceed the expectations of the most discerning of individuals and the multi-award win, as deliberated by a panel of the most seasoned of realty experts, is proof that it has surely raised the bar as a truly exceptional iconic masterpiece. We are confident that the next two honors to be bestowed on Tameer Towers will relate to customer satisfaction and to the delivery of the highest quality product on time," Dr Shaaban said.

Tameer chief executive Abdallah Hageali said the awards are a tribute to the status of the iconic development as a landmark, renowned globally for its stature and standing as modern masterpiece.

"As our flagship project, the Tameer Towers development epitomises that which we strive to achieve in all our projects, through the endless pursuit of perfection and innovation," Mr Hageali said.

Designed by Gensler, one of the worlds' most renowned architectural firms, the seven billion UAE dirhams Tameer Towers project developed jointly with Sorouh Real Estate.