Is The Euphoria Back In Dubai’s Real Estate Market?

In 2008, amidst signs of subprime crisis which decelerated the global economy, Cityscape Global, the largest business to business real estate investment and development event was held at Dubai World Trade Center on 6-9 October. Three weeks prior to the event, Lehman Brother and Meryl Lynch went bankrupt in USA. As a result, the global economy was subject to a financial crisis. However, in some spheres there was belief that Dubai’s real estate market may defy the newly emerging gloomy trends and throw some pleasant surprise.

There were obvious reasons for such euphoria as the real estate market in (Dubai) UAE was performing and yielding great results from the period of last five years (2004-08). Dubai, considered as the bridge between the emerging and developed markets, was seen as a symbol of luxury lifestyle mega projects. It was known for rolling out grand projects with unmatched pace and vigor.

However, the predictions went off the mark. The real estate sector which was soaring high so far suddenly seemed to suffer due to severe melt down and lack of liquidity (emanating out of global recession) coupled with over speculation. The event which showcased numerous ambitious projects was followed by reports about regulatory insufficiencies and fraudulent charges against some of the developers. The nature of discussion started shifting and the fundamentals of UAE’s real estate markets were questioned. Many of the projects got delayed (or cancelled) and real estate entities suffered huge losses.

The effect of a real estate debacle was very well reflected in the next Cityscape in 2009 to as a 50 percent drop in number of visitors was observed compared to previous year which witnessed more than 70,000 visitors. The number of exhibitors went down from 340 to 218 as well. Once known for luxury mega projects, now the emphasis was more on market fundamentals, realism and transparency. It was obvious, given the fact that property prices fell by 50 percent and number of active developers dropped by 60 percent compared to previous year.

However in the midst of real estate market debacle some optimism was seen back in 2010, mainly due to the Dubai World’s successful loan restructuring with a group of lenders involving various international bank. There were other pieces of encouraging news such as confirmation by Nakheel to pay USD 1 billion to creditor and Dubai government issuing a 1.25 billion USD dual tranche bond to be utilized towards infrastructure project. All these were indicative of some normalcy coming back to the real estate market. The next Cityscape event in 2010 was visited by 38,000 individuals from 115 countries. Approximately 200 exhibitors participated in the event. The name was changed from Cityscape Dubai to Cityscape Global with the intentions of attracting more foreign players. Nevertheless, there was little impact on the property market and real estate transactions.

Likewise, the results of Cityscape Global 2011, was intertwined with a crucial regional crisis, Arab Spring. Due to the political and economic crisis in Egypt, Syria and Bahrain, a part of liquidity was transferred to Dubai, which is considered to be a safe haven in Middle East and Africa. Dubai’s real estate market also gained in terms of tourist arrivals at the cost of other regional tourist hubs such as Egypt. However there was not much change towards the overall property market fundamentals as prices were still subdued.

In its next edition in 2012, number of individuals showing up remained unchanged at around 25,000 visitors; however, announcement of many individual projects such as Meydan city master plan, Shoba city and Dubailand Falcon city were made.

With less than a week for the 12th edition of Cityscape Global, it seems that the euphoria is back again. The web and conventional media is fraught with advertisements and promotions and many trade experts consider the excitement level at par with the 2008 level, albeit with more caution and stronger fiscal policies in place to curb speculation. The event is exhibited to host over 200 companies, highest in the last four years. Many of the Dubai based real estate companies will be exhibiting for the 1st time since 2008.

Major part of the excitement could be explained due to revival of investor confidence in the Dubai’s real estate  market. According to Dubai Land Department, Dubai received an investment of around 16 billion USD through a total of around 18,635 investors in 2012. A major part of the investments has been channelized in plots, apartments and villas.

Figure 1:- Contribution in Dubai’s Property Market Countrywise

Figure 1 above shows the total contribution from various countries in Dubai’s property market in terms of amount of investment in USD billion (line graph) and number of investors (bar graph).

For readers, unaware of Cityscape Global, it is the biggest real estate exhibition and conference on property development conducted in Dubai World Trade Center every year. Organized by Informa exhibitions, the event was 1st held in 2002. Real estate companies, architects and designers, city councils and various financial institutions from all around the world exhibit their product. Besides, individuals involved in different dimensions of real estate, high net worth individuals and property buyers come in big number to visit the event.

In addition to the exhibition, the event is associated with various conferences, sector series and awards. The event host conferences on Global Real Estate Summit, MENA Mortgage and Affordable Housing and Future Cities Conference. There are sessions for senior real estate developers, investors and delegates to network and share latest industry trends. There is also Cityscape awards for emerging markets, rewarding industry professionals and companies for designing excellent projects (built as well as future) in emerging markets. Presently the event also has sister events in various other parts such as Abu Dhabi, Egypt, Qatar, KSA, Latin America and Asia.

The market fundamentals seem to be strong and the real estate markets appear to be back on track. Further to this, with ongoing preparations for Expo 2020 in full swing (Dubai is expected to win the bid to conduct Expo 2020 in November. A complete range of reports will be published on the same) Cityscape 2013, presents tremendous opportunities for investors, developers and the overall UAE’s economy in general.

At Research Konnection we emphasize on blending strong research fundamentals with local nuances and sub trends, specific to UAE, GCC and MENA markets. Real estate being one of our key focal areas, our team is actively involved in tracking different dimensions of Cityscape Global. Our next analysis will be based on the outputs received of the survey, which we are conducting to understand, evaluate and quantify the excitement level among real estate investors. The outputs and conclusions drawn from the survey could offer useful insights for property developers, consultants, contractors, property owners, buyers and for all who are interested in Dubai’s property market. The survey findings will be revealed after the event. We will request you to take out two minutes and complete the small survey.

Take the Cityscape 2013 Survey

Author: RKonnect
The author is the Managing Director of Research Konnection, a Dubai based market research and consulting firm that helps local and international companies to identify emerging business opportunities and successfully expand in the Gulf region. The author can be reached at waqas@researchkonnection.com
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