Build it - but will they come?
Written on the 5 March 2009
By Jason Oxenbridge in Dubai
There’s a subtle synergy between the Gold Coast and Dubai, with their similar skylines, towering residential structures and the key economic drivers of construction and tourism.
LIKE the Gold Coast, construction has slowed significantly in the desert city. The property scene in Dubai is in correction mode with prices in all sectors falling amid job cuts, particularly in real estate and construction, where around $582 billion has been put on hold.
Large scale projects such as The Palm and The World Project are still going ahead, but they could become potential ghost assets if Dubai’s transient population (around 85 per cent) cannot be enticed to invest long-term.
But despite looming economic slowdown in the Gulf, there is still around $700 billion worth of civil construction projects underway. In an industry worth around $1.4 trillion, that’s almost half of all civil construction still underway. But, real estate services, leisure and tourism has fallen sharply in the last quarter.
That hasn’t affected the world’s tallest structure, the $800 million Burj Dubai from going ahead. While its official height has been kept under wraps, Gold Coast Business News can confirm that it will be 808m, to be completed on the 9/9/2009. Whether or not the lucky numbers stack up in terms of sales is yet to be determined.
For the listed Sunland Group, it has remained grounded while construction towers above on three of its new projects in Dubai. The developer is helping to shape Dubai’s ever-expanding skyline, with a number of landmark high-rise buildings on the books for construction.
Queensland Minister for Trade John Mickel recently visited Sunland executives in the UAE as part of a trade incentive.
“The Atrium is to be constructed as part of the new Waterfront development, which is unique in that it allows expatriate freehold ownership of beachfront property for the first time in Dubai,” says Mickel.
Sunland managing director Sahba Abedian, believes the company’s strong offshore joint venture projects in Dubai have helped to minimise risk and sustain growth.
“There is no doubt that Dubai over the past 10 years has established itself as an iconic brand,” says Abedian.
“The Middle Eastern market has benefited tremendously from the past decade from the rise in oil prices and have been able to generate significant surplus cash flows that have been reinvested in to their infrastructure and the creation of all of these amenities. It’s through this that they have been able to generate interest in Emirates Towers, The Palm and Jumerira and the World Project.”
An international survey of the major developed economies shows devaluation and deflation is creating buying opportunities in many areas other than the US, according to global construction consultants Davis Langdon.
Davis Langdon’s national research director Rachel Kelloway, says all markets are in retreat, but some are less exposed to global bank failure. Davis Langdon’s office covering the Gulf states highlighted a distinct split between loss of opportunity in Dubai and a higher level of confidence in Bahrain/Qatar.
“In summer 2008 workload in UAE was described as ‘overwhelming’, but there is now significant slowdown and client insecurity in Dubai,” says Kelloway.
“Funding in the Bahrain/Qatar region is secure on the basis of Sharia banking and backing from oil rich investors.”
The challenge for the Emirates will be how to attract and retain foreign investment at a time when reports in Gulf News indicate Dubai was cancelling 1500 work visas every day. The reality is that real estate prices, which rose dramatically during Dubai’s six-year boom, have dropped around 30 per cent in some parts of the city. With reports that hundreds of luxury cars are being dumped at the airport as expat owners flee the country in the midst of the crisis, Dubai’s once ultra busy roads are now often sparse with traffic.
The crisis is likely to have long-lasting effects on the seven-member emirates federation, where Dubai has long played the gregarious younger brother to the oil-rich and more culturally sensitive Abu Dhabi.