Developers continue flogging off the plan property in weakening Dubai market

OHMYGOSSIP — Despite a soggy real estate sector, Dubai developers are continuing to swamp the market with new offerings.

Major and secondary developers are now offering a plethora of incentives and drawn-out payment schedules to try and stimulate buying momentum. Despite the local regulator RERA imposing strict guidelines for payment schedules, major developers such as Emaar and Nakheel have continued to maintain instalment programs as per time schedules, and not linked to construction milestones.

Minimum deposits, substantial post-completion payments and various other derivatives of payment are now circumventing the conventional payment schedules in a bid to grab a share of the shrinking pool of buyers.

One of the difficulties in the sale of off-the-plan purchases is the cost and complications of resales, if in fact there was a burgeoning resale market which at present isn’t the case.

The fear in some circles is if the supply continues to build, a bubble will form which the authorities have worked hard to avoid.

Emaar, the region’s biggest developer which paid $4.4 billion in dividends last year is undeterred. “We have a land bank of over 235 million square metres where we can develop for decades to come. I’ve never revealed these figures before, but maybe I should have, so people can understand the sheer size of what we do,” Mohamed Alabbar, the group’s chairman said last month.

Another sales-generating mechanism is a recent switch to hotels and the sale of hotel rooms with double-digit returns forecast. Budgets provided however are based on the current hotel market which has been booming in terms of occupancy and room rate. However as with residential property development, the number of new hotels under construction is soaring. On Palm Jumeirah alone there are some 4,000 hotel rooms with several more properties under construction. The Kempinski’s second hotel, adjacent to the existing one, is expected to be completed next year. It will more than double the room inventory of the existing hotel. The Atlantis is expected to add another 1,000 units, although 200 of those will be residential apartments. The 8, and The W have new resort hotels incorporating apartments under construction on the west crescent of the Palm, and another hotel is being built alongside the Zabeel Saray. The Viceroy, a hotel with individual rooms sold on projected returns of 12%, with 70% payment not required until completion, will be finished next year.

The InterContinental chain has just added a new hotel at Dubai Marina, and Damac’s Paramount edition is underway, with the local developer selling rooms off-the-plan.

New hotels are also planned for Nakheel’s new 15.3 square metre waterfront city project Deira Islands, which will add 40 kilometres, including 21 kilometres of beachfront, to Dubai’s coastline. The project will house hotels and serviced apartments, retail destinations, mixed-use buildings and residential waterside developments at what Nakheel hopes will be a new cultural, residential and commercial hub for the emirate.

With softening sales, and owner-occupiers that may have bought now preferring to sit things out, the rental market is going in the opposite direction. Rising rents are pressuring employers to increase living allowances to allow their employees to cope. Adding to the frustration of the looming oversupply in contrast with the developing under-supply in existing product, one property executive has claimed 20% of residential units in Dubai are unoccupied, having been bought for holidaying only or for future use. “There are no recorded statistics for absentee owners, but in my opinion, I would safely say it is currently in the region of 20 percent of properties, of which buyers mainly come from Europe, Russia, the GCC and to a lesser degree the Indian sub-continent,” Andrew Cleator, luxury sales director, at LuxHabitat, and formerly of Ocean View Real Estate, said earlier this month.