Construction Week Newsletter 24th September 2005

Property 'chocolate factory' comes to town along with its resident speculators

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By  Sean Cronin Published  September 24, 2005

Willy Wonka brings Cityscape to Dubai|~||~||~|When estate agents start talking the market ‘down’ you know it’s time to start to worrying — and that is what a few of them were doing at last week’s Cityscape event in Dubai. And it is not just property folk who are beginning to acknowledge that market fundamentals are looking a little out of kilter. Investment bankers and economists attending last week’s property industry gathering were also making grave noises in private. What a bunch of party poopers they are. While we were all enjoying looking at those wacky entertainers walking around on stilts and humming along with the robots singing ‘Fly me to the Moon’, a few spoilsports had to go and ruin it for everyone by talking about ‘market corrections’ and ‘risks of oversupply’. If I had my way, all of these doom-mongers would be quarantined together in a purpose-built despair-themed area of Dubailand along from Falcon City of Wonders, called Pittsville City of Blunders. All of the new homes would come with a subsidence guarantee and mortgage providers would grant loans on the promise of negative equity — then they could all say ‘I told you so’. But perhaps it is us real estate evangelists who are being too hard on the rapidly growing band of non-believers. They have a few valid points to make which at least raise questions about the longevity of the local real estate boom. One of these is that none of the major European fund managers have dipped their toes in the market here yet, although they have been quite happy to dive into other risky real estate sectors such as Russia, China and India. That is because this market still lacks the transparency and benchmarks they require for their investors. This has not stopped the proliferation of locally launched funds in recent months as well as the myriad over-subscribed IPO’s. But these are now being seen as part of the problem, because it is largely the investors in such funds and IPOs that are supporting the market and not the home-buyers. “It’s all a bit unreal,” said the director of one European real estate fund attending Cityscape. The Financial Times correspondent compared this year’s event to a trip to Willy Wonka’s chocolate factory for the property enthusiast. And I suppose it was a bit like that — even if there were no Oompa Loompas to be seen working anywhere. They were all protesting outside because they hadn’t been paid in two months. Sean Cronin Editor||**||

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