A Closer Look at the Dubai Property Market

Spectators take in views of Emaar's Burj Dubai and Downtown projects at Cityscape Dubai (6-Dec-06).

Many investors, potential investors and casual observers seem to still have doubts about the safety of purchasing property in Dubai, even as the property market continues to expand through its fifth year. At the same time, the latest Cityscape Dubai event (4-6 December), which showcased both future and current projects, was once again a testament to the unprecedented scale of activity and level of enthusiasm in the industry. It was without a doubt a grand display of where the property markets in Dubai and the Gulf are and to where they aim to go.

Beyond the glitz and hype, however, the fundamental questions for investors remain:

• Will property on offer in fact make it to completion even once construction has commenced?
• Will the quality standards promised be achieved?
• Will delays plague the project?
  ...and not least,
• Will one's investment be guaranteed, at least up to the time of hand-over, and beyond?

The Dubai Marina site of Damac's Ocean Heights tower (8-Dec-06), launched in Oct. 2004. Originally slated for completion in 2007, now estimated by some for a 2009-10 completion.

The short answer to these questions is that results will vary by project and developer. The broader picture, as it were, is hard to comment upon with the relatively limited number of properties that have made it to completion and, even more so, with the limited amount of scrutiny paid by both the media and the government to problems and issues that have come up.

That being said, anecdotal evidence is available. One source is the Gulf News' archives along with those of other local publications, where search queries can pull up news, good and bad, on both specific properties and the industry-at-large. The online forums of Skyscrapercity.com also offer a wealth of insight into the the real goings on in the property scene--it requires considerable sifting to get through the innumerable exchanges among forumers.

My own take is based on a personal, albeit perhaps biased, scrutiny over the year and a half that I have taken steps as an investor. The skinny, as I see it, is as follows:

Nakheel's Jumeirah Palm island (24-Nov-06), slated for property handovers over the next 6 months.

• Emaar, among the large developers, shines. Its projects get built in a timely fashion and are of both satisfactory design and quality. This record may placate some of those who balk at higher purchase costs. While there have been complaints about build quality, there seems to have been no real disasters. By contrast, however, property management fees seem exhorbitant compared to other properties and what one gets for them.
• Nakheel has a mixed record, including a disaster or two, and it has in some measure yet to prove itself. The verdict on Nakheel should remain pending until handover of its Jumeirah Palm properties over the next half-year, should that highly-anticipated move in fact take place.
• The other large developers, including Dubai Properties, Sama Dubai, Damac and others, have yet to prove themselves, even more so than Nakheel. For most, significant delays appear to be the order of the day. Reassuringly, however, if the record of Dubai Properties, builder of the 40-tower Jumeirah Beach Residences complex, is anything to go by, then ambitious projects can and will be delivered, even if late.
• The mid- to small-size developers are a harder lot to classify, not only due to the fact that they are many in number, but many of their projects are yet in the early phases of build or development. There is, for example, Tameer with a 107-story tower and a 91-story tower under development in Dubai Marina, in addition to several other major projects on the drawing board. This perhaps wannabe major developer has no existing record of delivered or even half-constructed projects to evaluate.

Towers under-construction and empty plots along the Dubai Marina canal (24-Nov-06).

Although Dubai Marina is a master-planned project of Emaar and contains a number of Emaar properties, it is in large part being built-up by mid- to small-size developers. This means that to really evaluate the merits of the development-at-large or any specific project, the reputation and record of the specific developer in question needs to be examined. The one generalization that one might make, however, is that excluding the JBR project, fewer than half of the Marina towers have yet been built with most of the largest ones not yet started or in the early stages of construction.

The big picture must take into account some of the dynamics of the Dubai and larger Gulf real estate and construction industries, which substantially impact the success or lack of success in each project. These dynamics include,

• a large unskilled, poorly trained and poorly paid construction workforce,
• intense competition for skilled and experienced managers, consultants, contractors and the like, and similarly
• tight supply of equipment and materials.

Added up, it is hard and will continue to be hard to get things right. The powerful, like Emaar, will have more leverage but likewise they will be less accountable to any individual client. The smaller players will struggle to get what they need to pull the job off, but it is more essential to their survival that they do, even on the smaller jobs.

Laborers at the Marina Heights tower in Dubai Marina (8-Dec-06).

That being said enough work has been carried out over the past 5 years that the industry has begun to enter a middle stage where there is a significant level of expertise locally. Even the underpaid, overworked laborers in time pick up a considerable amount of skills on the job. As this happens, getting the job right increasingly becomes an attainable goal.

A look specifically at the ongoing projects in the Upper Marina or tallest block will follow, to shed some light on the individual projects there.

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