After the Property Crash - The Dubai Property Market

The real estate market in Dubai is showing signs of recovery after a 3 year slump. The real estate market in Dubai was worth around $31 billion at its peak in 2008. However, the mood today is one of cautious optimism as the market is now showing signs of recovery from the recession’s period. At this year’s Cityscape Global event in Dubai, investors had a more business to business atmosphere than in previous years. According to Jones Land LaSalle rental prices in the office and residential sectors are bottoming out and the retail and hotel sectors are already showing a growth buoyed by tourism. This follows a dip of around 18.6 percent in the real estate sector in 2009 and a recovery by around 2.5 percent in real terms in 2010 according to the National Bureau of Statistics. The real estate’s sectors contribution to the real GDP grew exponentially from Dhs 95.6 billion in 2006 to Dhs 111.1 billion in 2007 and to  Dhs 114 billion in 2008 before slumping to Dhs 92.7 billion in 2009. As a result of the real estate crash, the prices of property in Dubai plummeted 60 percent in Dubai. The result of this was that many projects and unplanned constructions where put on hold or even shelved. However, there were other factors at play. For example, the continued government spending on infrastructure, including the Dubai Metro and new roads, and visitor numbers increasing, the real estate sector rebounded to Dhs 95.1 billion in 2010.
One of the hardest hit developers during the real estate crash was Nakheel, which is currently undergoing a Dhs 16 billion debt restructuring programme and has been handed $8.71 billion bt the government and written off Dhs 78.6 billion of its real estate assets due to the emirates property crisis. Nakheel followed the ambitious Palm Jumeirah project with other projects such as other man made palm shaped islands in Deira and Jebel Ali, including the World. These projects left Nakheel exposed during the global financial crisis. But the company is expected to post profits by the end of 2011. The Arab spring has confirmed Dubai as a safe haven for tourists and investors alike. This is because Dubai has benefited from the Arab spring and has seen the rise in tourism and visitors. The Hotel and retail markets have benefited extremely from the Arab spring. But as a result of the sovereign debt crisis in Europe, the outlook here in the UAE has been one of caution. It is no longer about new product launches it is about existing projects. There are very few end users at Cityscape; it is now more an event for B2B contractors and suppliers. There has been a transition and it is more realistic with the overall market becoming a lot quieter because sales activities and the projects have slowed with people reassessing process making it all much more competitive.
The retail sector is growing because tourism is such a major part of the retail sector. The villa sector is starting to improve and the residential sector is starting to improve too. Apartment rentals are still declining, but there will be growth in the residential sector rents in 2012. However, the big cloud hanging over the market is the Eurozone and the US Recovery as Dubai is very closely linked. Recovery is expected to continue especially with the deal made by the Eurozone on the Greek debt crisis. This is seen as having a positive impact and a good effect on the UAE economic future. The Office market is feeling the brunt of the economic crisis and is the worst performer of all the markets. The Jones Lang LaSalle report points out key drivers for the Dubai real estate market stemming from the increase in passenger traffic to Dubai international Airport, increasing by 15 percent in 2010 and continuing to increase in 2011, and hotel occupancy rates at 78 percent as of July 2011, up on the 60 percent as of July 2009