Property predictor

With the Dubai real estate industry slipping over the past six months rumours of a downturn are constantly being circulated, but Peter Penhall, CEO of Gowealthy Holdings, tells James Bennett why property tourism and changes to freehold laws for foreign investors could spell a fresh wave of growth

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By  James Bennett Published  April 13, 2006

|~||~||~|If you thought the Dubai property market was reaching saturation point, think again, says Peter Penhall, South African chief executive of Gowealthy Holdings, in his office located on the infamously gridlocked and high rise packed Sheikh Zayed road. And if you take a minute to look out of the Gowealthy office window you can see why Penhall’s not wrong. As far as the eye can see are never-ending construction projects being started, delayed and completed alongside endless rows of cranes and road works. Not a pretty site, but one that Penhall is pleased to see every time he arrives for work, particularly as according to the Dubai Lands and Properties Department, around US $700m worth of land and property changed hands in Dubai in February this year, up from US $550m in January. A total of 515 transactions were recorded as well as 157 mortgage transactions — property is big business in the Middle East and is getting even bigger by the day. Gowealthy, and its website, has seen huge growth in demand and sales over the five years it has been trading. Started as a small company in Hong Kong in 2000 by chairman K V Sidharthan to service the offshore industry through its online portal, it then noticed that Dubai was set to grow faster than any other place on the planet. In 2003 it then relocated in order to diversify its product base and included Dubai properties as a viable investment for worldwide investors and homebuyers. It was then that Penhall saw the opportunity to join a fast growing business that dealt with markets he was familiar with. Back in his native South Africa, Penhall was CEO of one of the largest listed property funds on the local stock exchange. He then joined the Damac group in 2002, the largest property developer in Dubai with 21 towers to its name, swiftly followed by a move to architectural practice Creative Kingdom. But now he’s ready to see the company grow to an even bigger scale. “Over the first two years it became apparent that there were a huge number of clients interested in placing funds into a secure marketplace. When I was at Damac we were one of the first to launch one of the major towers within these free trade areas. Ever since then the market has boomed and Gowealthy is Dubai’s top web portal for freehold property. We offer in excess of 100 properties on our site and have around 300 000 unique visitors a month.” Times are changing in the real estate market with the government’s long-awaited formal announcement on changes to property law revealed last month. The newly liberalised Dubai laws allow foreign ownership in select areas run by the principal developers, namely Nakeel, Emaar and Dubai Real Estate, while UAE and GCC nationals are still be allowed to own a property anywhere in the Emirate. Penhall says the main sites will include current construction areas such as the Business Bay, Jumeriah Lake Towers and Sports City, to name a few. He believes this will free up more property and stimulate a fresh wave of investment and growth in the region, particularly as the market has faced previously unheard of difficulties over the past six months. “Over the last six months the market has slipped. This slippage stems from some of the major developers not actually delivering entirely on time and unfortunately this has given the market a slightly negative name. But everything else it does has been positive.” Despite numerous construction deadlines being missed, delays on major projects and stories of poor design and leaking roofs when it rained 14mm over two days in mid-February, Penhall is keen to steer clear of any negative issues, but is still realistic that property is a risk like any other. “In Dubai, as in any market, there’s a risk and property is no exception. Property is a vehicle from the point of view of medium to long-term risk. “If you’re entering property as a short-term gain opportunity then clearly the risk is high. Had you bought a unit a few years ago you would have made a lot of money but it is a question of timing. “The risks are there but Dubai offers a huge opportunity to property buyers and these opportunities are far from over. Yes there have been delivery problems, but from a quality point of view, Dubai is generally above average. There have been stories of some fairly shoddy work but there are hundreds of thousands of units coming off and the element of the one or two that have had problems is not bad considering.” Penhall, however, is realistic and realises that simply throwing up a series of large developments without designing and building adequate infrastructure is a continuing problem, but one that is now being swiftly dealt with. “The problem Dubai has is from an infrastructure point of view, not the physical buildings themselves. At the moment there are major roads works everywhere but the powers that be are recognising that and are taking positive action. “No one has really predicted the amount of people coming here. The strain that this has had on the infrastructure and public roads has and continues to be very intense”, he says. “From the public transport point of view there is not a lot of choice but that will come through in time and planning, and even building has started to come through. But they don’t talk to us from that point of view, we are agents for the major developers, we take the product that they come up with and sell them on.” The rising importance of a solid infrastructure system and new freehold property laws are not the only areas of construction change underway in Dubai – a new trend is taking the region by storm and Penhall’s team is leading the way. The new craze is property tourism, something the South African believes is unique to Dubai and a major differentiator between Gowealthy and its competitors. “Over the course of the last year we have started to run property tours. Coming into Dubai, you pay a nominal fee of US $100 and book a seat on a bus to take you on a tour of all the major developments. You wouldn’t see this anywhere else in the world.” Penhall is confident the craze will grow with new developments such as the Burj Dubai, Emirates Hills and the Palm islands generating huge interest. “The market has grown so much over the past few years that you now have to physically start visiting properties as a group and with a guide. Up until recently it has mainly been visitors coming in to see the properties and being left to their own devices as well as being taken there by a taxi driver who knows nothing about property. “We saw a gap and an opportunity to fill that gap and the clientele are just growing and growing and growing. We have a bus that runs at 30 seats and a fleet of 4x4s you can hire.” Gowealthy is also growing and diversifying its products along the way. The group now has four offices across Dubai so that clients can walk in and receive one-to-one treatment and not simply face a website, while it also offers property management and real estate equity investments and is opening up offices across the UK. Penhall, however, sees another few years of growth before things start to slow down and aims to take full advantage of the increasingly liberalised market. “There is at least another five years of constant growth and saturation won’t reach until at least then. With the new property laws now announced we see that as another major growth driver. “Until they were announced people were sitting back and waiting cautiously to identify what might happen and waiting for the fact they could register title and enter the market.” He also says that other sectors could take advantage of the changes with multinational banks getting in on the act. “Up until now finance houses haven’t been able to register bonds because you can’t register the physical building. Foreign banks will join up with local banks that have trading licences and as a whole it will stimulate property for at least the next five years. “I don’t think we will see sharp growth. The sharp growth has happened. The growing demand in recent months has seen developers unable to keep pace.” But alongside growth comes competition and other agencies interested in fighting for a slice of the property pie. Penhall, however, isn’t worried about rival businesses entering the market and surprisingly says that he would welcome increased competition. “There’s always room for other major companies to enter the marketplace and I would welcome it. It keeps us on our toes and keeps us looking at the market and constantly looking for new opportunities. “We think the future of our business is to largely partner and work with another agency that has local reach and is looking for an international reach.” The coming years will determine the level of success in the Dubai property market with failure and saturation not even words in the dictionary for developers or agents such as Gowealthy. New property laws and an increasingly liberalised marketplace will shape things to come. But, as with the majority of business sectors in the region, the real growth in property is only just beginning.||**||

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