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Breakfast with the Dubai Property Society

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The first business power breakfast of the New Year certainly felt a bit overwhelmed by the night before with the spectacular opening of the newly named Burj Khalifa in Dubai, the world’s tallest building.

But what better start to the year for the official Dubai Property Society, and the premium monthly networking event for the Dubai real estate sector. If only the outlook was more optimistic for 2010.

2010 worries

The 50 or 60 members gathered in the Club on the 33rd floor of the Dubai World Trade Centre, the first high-rise office tower in the Gulf just thirty years ago. The mood could be summed up as glad to see the back of 2009 but worried about 2010. Why?

First, the debts incurred in the real estate bubble that burst in September 2008 still haunt the sector. The $22 billion Dubai World debt rescheduling should be done by May. But that might well entail big write-offs for the international and local banks and a continued squeeze on lending in Dubai.

Secondly, the new bankruptcy laws that are now imminent surely mean a year of insolvencies and liquidations. Dubai World is not the only debt-ridden developer, just the biggest. Property fire sales are not good for price levels.

Thirdly, the huge backlog of property about to be delivered in Dubai means there is a massive supply overhang in the market. Even a modest recovery in local business this year – with oil prices driving regional business upwards – is not going to produce sufficient demand to take up this slack.

Fourth, home finance remains expensive, and the Amlak-Tamweel merger has been put back from February to May, and could still take longer. Until that happens a lowering of local home finance costs is unlikely.

Market bottom

Overall, the best that might be said is that when the DPS meets for breakfast in a year’s time the marketplace could be a great deal clearer and the consensus among members seemed to be that 2010 is the year of the clear-out, ready for a new start.

This also ought to be the year that anybody who invested in the many Dubai off-plan property schemes finds out the true worth of their investment, if it still has any.

From a UAE perspective there was far more optimism about prospects in Abu Dhabi, where prices have also taken a hit but demand is far higher and supply much more constrained than in Dubai. Whether that makes Abu Dhabi property a good buy now is debatable but at least there is a positive argument. Dubai remains a different story.

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Written by Peter Cooper

January 5, 2010 at 11:23 am

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