It has been over twenty years since the construction of the man-made islands of Dubai began, the world’s largest artificial archipelago. Widely announced as the star project of the urban development of the United Emirate, two decades later, the story is very different to what the developers would have imagined. Islands yet to be completed, abandoned projects, the sea reclaiming its space… even so, Dubai is not giving up and it is confident that, despite the delay, it’s dream will become a reality.
Damac Properties, one of the largest property developers in Dubai, warned over the weekend about an imminent economic crisis, festering in Dubai’s real estate market.
Damac Chairman Hussain Sajwani toldBloombergthat a collapse in the housing market is nearing unless new home construction is halted for several years. “Either we fix this problem, and we can grow from here, or we are going to see a disaster,” Sajwani said.
Sajwani is the latest real estate executive to voice his concern that Dubai’s housing market is on the brink of disaster.
The slump in the city’s housing market has been underway for the last five years. Prices have tumbled by more than 30% in the same timeframe.
Despite the requests to halt all new home sales, Sajwani said Damac would complete 4,000 homes in 2019 and another 6,000 in 2020. The developer is expected to reduce new builds and concentrate on selling inventory next year.
“All we need is just to freeze the supply,” Sajwani said. “Reduce it for a year, maybe 18 months, maybe two years,” he said.
Sajwani predicted oversupplied markets would crash home prices.
He said if prices drop further, then it would trigger a tsunami in non-performing loans that would cause contagion in the banking industry.
“The domino effect is ridiculous because Dubai’s economy relies on property heavily,” he said.
Standard and Poor’swarnedlast month that economic growth in Dubai will trend lower through 2022 due to depressed oil prices, a global synchronized slowdown, turmoil from the US and China trade war, and geopolitical uncertainties in the Middle East.
The international rating agency said deterioration in real estate and tourism sectors had weighed heavily on the domestic economy.
Housing data from Cavendish Maxwell’s Dubai House Price Index via Property Monitor showed home prices plunged to their lowest levels in June, not seen since the2008 financial meltdown.
Damac’s shares have crashed more than 77% in the last 26 months, mirroring the downturn in the overall housing market.
If oversupplied conditions aren’t corrected in the coming quarters, Sajwani’s prediction of a market crash could unfold in Dubai in 2H20.
The average villa is now trading for less than it did following the last global financial crisis
Newly constructed villas in Dubai. Chris Jackson / Getty Images
(Mansion Global) Dubai house prices plummeted to their lowest levels in over a decade last quarter, according to new data from U.A.E.-based property firm Cavendish Maxwell.
The average single-family home price sunk 24% over the past year to AED1.82 million (US$495,500), a level not seen in over 11 years despite a global recession and regional economic meltdowns over the past decade, according to data on website Property Monitor.
The average house, referred to locally as a villa, is now trading for less than it did during the darkest days of the global financial crisis and subsequent credit crunch, which hit Dubai the hardest in 2010-11. It’s also lower than at any point since oil prices crashed in 2015, according Property Monitor, which is powered by Cavendish Maxwell.
In June alone, the average home price—including both single-family houses and apartments—fell over 15% compared to a year ago, according to a report from Cavendish Maxwell on Thursday.
While the Dubai economy remains relatively robust, powered by nearly 8 million foreign expats who live and work in the city, nonstop building has created a glut of housing that’s prevented home values from appreciating in more than a decade.
Sprawling master-planned communities dotted with mansions have been hit the hardest.
“The annual decline in house prices was more pronounced in communities such as IMPZ, Arabian Ranches, Emirates Living, Discovery Garden and Dubai Silicon Oasis, where house prices declined by more than 16% on average,” said the firm in its report.
In the exclusive man-made island known as Palm Jumeirah, prices have slipped 14% over the past year. Even thriving Dubai Marina, which overlooks a port of luxury yachts, has seen average home prices slip 13.5% since June 2018, according to the report.