Construction Week Newsletter 9th April 2005

Dubai’s good times roll on. However, recently I have heard conflicting views about where the emirate is heading — and leading the rest of the Gulf, too.

The talk of the town is “what is going to happen?” Both rents and real estate prices are climbing and rumblings are beginning to be heard. Some developers tell me that there will be a market correction of some sort, but they don’t appear to be unduly worried.

  • E-Mail
By  Eudore Chand Published  April 9, 2005

Editorial Leader|~||~||~|

Can we defy the trade cycle?

Dubai’s good times roll on. However, recently I have heard conflicting views about where the emirate is heading — and leading the rest of the Gulf, too.

The talk of the town is “what is going to happen?” Both rents and real estate prices are climbing and rumblings are beginning to be heard. Some developers tell me that there will be a market correction of some sort, but they don’t appear to be unduly worried. When such a market correction will take place is anybody’s guess. Will it ever happen at all is also a point of consideration. To be fair, there are several other developers who don’t seem to have any creases on their smooth, wrinkle-free faces. They seem to be building more and more and reaping in the rewards with both hands. The frantic pace of building activity in Dubai is set to continue for the next 15 years as various phases of major projects such as The Arabian Canal, Dubai Waterfront, Jebel Ali International Airport and Dubailand move towards completion. Running alongside will be the expansions and future phases of infrastructure projects such as the Dubai Light Rail System, the creation and extensions of road networks and the provision of utility services. These huge projects in turn are expected to boost construction of associated and service structures by the smaller developers, entrepreneurs, investors and businessmen. Such growth confirms projections that the ongoing boom will not stop for years to come and that the good times will roll on, at least into the near future. And yet, historic economic data shows that business activities move in cycles and have a defined life span. One economic certainty is that any initial growth will taper off and stabilise at some point. I’m sure that we haven’t yet reached that point, and I believe there is much growth ahead of us. True, there are fewer instances nowadays when huge new developments are sold out within hours of opening, just on the basis of an artist’s impression. But hold on, is that right? The Dubai property market has not yet reached maturity relative to other established markets. Developments should not be sold out on the basis of an artist’s drawing. A sale should take place on the consideration of the intrinsic value of the product, its full specifications, the strength of the developer and, of course, reasonable price as the true free market situation would stipulate. One doesn’t need to go to international markets for examples; one only needs to remember back to the early eighties when capital markets of Kuwait crashed and some UAE banks — heavy with empty buildings called in for default by developers — had to merge in the face of a property-led recession. While even the most pessimistic developer talks of “just a correction”, care needs to be taken that the correction remains just that, and doesn’t snowball into a full downturn of the business cycle. Dubai has managed to keep the turn of the cycle away by fresh injections of projects and its enthusiasm for growth. Its government and people now need to ensure a level of maturity that keeps everyone happy. Dubai is a free economy and is proud to be so. But care does need to be taken on some critical fronts. Quality is one: buildings must adhere to a minimum quality, and quality does cost. It’s true that major developers may stick to quality to ensure their reputation, but what about the one-building entrepreneur? What about the fly-by-night operator? The second thing that we must ensure is customer satisfaction. If companies don’t care about the customer in a demand-driven market, then the authorities need to ensure consumer protection. Provision of transparent information (such as full specifications), which help the decision-making process, should be made obligatory. For the boom to continue, we need to ensure that all parties concerned — from the developers and their associates to the customers and the authorities — are raring to go. Let’s not allow discontent to set in.||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code