The overall state of the economy has a profound impact on the thinking of its players or constituents at the local level. When the economy is good, there is freer flow of credit and commerce, with promotion of business dealing easy and quick. But when the economy is in a downturn, worries about the future result in a slump in business opportunities and the free flow of credit and cash also dries up. As fears escalate, they become the arbiters of their own destruction. The resurrection of spirits and hopes is easier said than done and is very difficult to accomplish. It requires discipline and faith in the Government and everybody needs to do their bit in unison. It is swimming against the tide of current realities and that is what makes it so difficult. Even President Obama in the USA could not persuade the American public to change its mind and that is why consumer spending remains cautious in the light of the unemployment which has steadied at 10 percent for the last few months. Let us now move to the real estate sector in Dubai and try to trace the reasons behind the decline in Dubai rental properties. One reason is the exodus of workers that took place in the wake of the property sector downturn. Almost overnight, hundreds of people began losing their jobs. Some were even fired over the phone while on vacation in their home countries. This is one of the worst ways to part with an employee and speaks of the unprofessional conduct of the Human Resources Department of that firm. Anyway what this meant was that a lot of rental properties became vacant. The owners of these properties had to adapt to the new situation and in consequence they had to offer new rentals at reduced rates or make other adjustments in the contracts so that the left over workers could be attracted to rent these properties. The reduced rents even impacted the rates of Dubai hotel accommodation with some hotels having to cut their rates by as much as 50 percent just to keep occupancy going. The impact has even been felt on the shopping, dining, retail and other industries. All of these benefitted from migrant worker populations. Then again there are some owners of rental properties that have holding power and others don’t. Many have an urgent need to rent or lease their property as the rental income partly pays for their livelihood. Others use the rental income to service the property’s own mortgage taken out with a bank. Whatever the reason, this can again affect the rates of rental properties. Another point worth keeping in mind is the number of properties that are available for rent at any given time, versus the demand for such rental units. The ratio of demand to supply will determine the Dubai rentals in general in a given area of Dubai. History of rentals taken in the past and the level of infrastructure is important also, as the type and level of amenities, comfort and ambience offered can raise rental rates in a specific community like Dubai villas, marina properties, Arabian Ranches and Springs or the Palm Jumeirah Villa. With the forecast for Dubai in 2010 being that an excess of 20,000 units is already anticipated, the market for Dubai rental properties does not seem promising. However additional new projects are not being picked up so eagerly, as it looks like Dubai itself will run out of land mass very soon. Kleindienst.ae is one of the most experienced firms looking at property for Rent in Dubai. You can also contact them for short term rentals Dubai, Dubai accommodation for rent, or indeed any kind of Dubai property.
The city of Dubai got a much needed boost in the media last night. The occasion on 04 January 2010 was the unveiling of the world’s tallest building- the Burj Dubai. Sheikh Mohammad Bin Rashid Al Maktoum, the ruler of Dubai did the honors in a glitzy ceremony. As expected the media were out in full frenzy, as were more than 1000 city dwellers. It was a festive atmosphere not unlike honoring a Hollywood icon, to which the Sheikh once compared his city. A colorful hot air balloon served as a vantage point for celebrities and journalists. The atmosphere was loud with cheers and traditional Arabic songs blared through the noise. Laser lights had been placed at different locations on the structure. Then at the penultimate moment as Sheikh Mohammad cut the ribbon, the sky was lit with a 1000 fireworks. The celebrations lasted well into the night. With 160 storeys and a height of 828 meters (2717 feet), the Burj is twice the height of the Empire State building, once the world’s tallest structure. Moreover it is considerably higher than the next tallest structure at present, the Taipei 101. With excavations started on 04 January 2004, the Burj took six years to complete, at a cost of US$1.5 billion. The tower, which has been renamed Burj Khalifa in honor of the ruler of Abu Dhabi, promptly recognizes the timely assistance of Abu Dhabi in dishing out US$ 25 billion to assist Dubai in meeting debt obligations. US$10 billion promptly went to Dubai World to cover its exposure on Nakheel and Limitless. Even so, the financial and economic sector of Dubai is yet to recover from the shock created by the impending crisis. The Government of Dubai also mishandled the situation, first saying that it would support Dubai World and then reneging on its promise. This led the Western world to believe that Dubai itself was in danger of bankruptcy. Though the present crisis has been averted by a meeting with creditors and a standstill for 6 months on debt of US$22 billion, the economy has still not recovered. The lackluster performance of the stock market and the tightening of credit in the financial sector are indications that Dubai is still in the doldrums. If market forces do not stop this downhill trend, pretty soon the Government of Dubai will have to artificially stimulate the economy. The good news is that work has resumed in over 60 percent of the construction projects in Dubai previously held back dueto staffing, administrative and financial difficulties. Work crews can be seen once again on the streets. People are coming to Dubai albeit cautiously as the picture of the last exodus of expatriates still looms large. But with work activity resuming, it is hoped that people will flock to this cosmopolitan city once again. There is no shortage of apartments for rent in Dubai, and many of them are being rented at affordable prices. Property such as Dubai marina apartment is still being quoted at a premium. Firms like Just Rentals specialize in Dubai property rental in this emirate. Using their expertise makes it easier to dubai properties to rent. You can register on the site and check out the services of Just Rentals Dubai, proceed to trace the latest prices of rental in Dubai on various types of property, and also look at some Dubai rental properties in the Just Rentals portfolio being advertised on the website.
The whirlwind of rumors surrounding Dubai’s financial crisis emerged seemingly out of nowhere. Though it’s no secret that the US recession has also left its imprint on the shores of Dubai, the flush coffers of the once oil producing state seemed more than adequate to quell any economic worries. One must admit that the housing and financial sectors have been the worst affected, since the downturn in economic activity has first and foremost affected these drivers of Dubai’s economic growth. There was a time when it seemed that construction would never stop in this glittering emirate. The sound of a drill, a hammer and a chisel were among the most ubiquitous that one could hear in the still of the afternoon or the dead of the night. Now it seems that all is quiet and desolate, with the majority of expatriates having left on the heels of an unemployment spree. Prices of residential, marina and villa properties have come down from artificial highs. Hotel rates and private single and sharing room rentals have also followed suit. It seems the best of Dubai’s six year housing and construction boom is behind us. Once the reality sank in, the Dubai hotel industry was in for a shock. Dubai’s urban planners had already planned for quite a number of hotels in Dubai, and as a result have overestimated hotel needs. Take Asia-Asia, planned to be the world’s largest hotel with 6500 rooms, part of the Badawi Project at Dubailand. Then again, the rentals of many hotels in Dubai are still on the higher side, even in the eyes of Westerners. There was a recent report stating that Dubai office space is the tenth most expensive in the world. Clearly, to revive the sagging economy, Dubai will have to make a lot of things more affordable. This will include everything from parking fees to the general cost of living not only for Western expatriates but also for the Indians, Pakistanis, Bangladeshis, Filipinos and a host of other nationalities that manned its various business sectors from shops to supermarkets. Otherwise they will simply not be induced to come back. So whether one looks at apartment hotels in Dubai or indeed, any other sort of rental or living establishment, it will be some time before we can hope for Dubai hotel bookings to full capacity once again. In fact in the present crisis scenario, many if not all Dubai hotels have slashed their rates to increase the possibilities of booking more rooms for longer periods. There is fierce competition to survive in Dubai’s hotel industry nowadays and the intending customer or traveler will be the better off for it. It is clear that a healthy recovery of the economy and the hotel industry will depend on a host of factors such as cost of doing business, investment, construction and trading opportunities, employment and housing and apartment rentals. Meanwhile it is reported that rentals for residential properties in Dubai have fallen 38 percent since the beginning of 2009, with an 18 percent decrease in Abu Dhabi. On the positive side, the recent increase in investor activities is an evidence of recovery. Previously excess liquidity and easy monetary policy had resulted in the interest rates being considerably low. Due to dollar depreciation, money was flowing out of banks into real estate and property. It will take a little time for investors to regain confidence in Dubai property once again.
Whatever the outcome of the Dubai World financial crisis, one thing is certain. Hotels in Dubai are going to have a tough time in the months, maybe even years ahead. It doesn’t take a psychic to see why. As economic activity has slowed down in the housing and financial sectors, it has also affected the other segments of the society. Many expatriates have been forced to leave following the termination of their employment contracts. Some have left behind a lot of unpaid bills, credit cards and keys in the ignition of their parked cars at the airport. It’s all part of life. One may argue that with the sub-prime mortgage crisis in the USA escalating out of proportion and engulfing the financial sector as well, it was only a matter of time before its effects were felt all over the world. And Dubai was invariably affected starting in mid 2008. Following the downturn in the housing, construction and financial sectors, allied sectors like shopping, hotel and others have definitely felt the impact. In the glory days of the recent economic boom that culminated in June 2008, hotel occupancy rates in Dubai were almost 80 percent despite the high prices quoted. As business was brisk and there was a multitude of opportunities all over the emirate, this inconvenience was just worked into the equation as a part of the cost of doing business in the Middle East. Now however, it is a distinctly different story. With the economic bubble having burst, the future suddenly does not look that rosy. Recent reports by a US based firm, Lodging Econometrics, found that the number of planned projects in the Middle East hotel industry declined by 17 percent over last year. Amazingly, this region has still not lost its appetite for taking risk, compared to a 21 percent decline seen across Europe. But one really wonders whether the grandiose plans of the ruler and the Government of Dubai will really bear fruit and if so when. Dubai has clearly erred on the side of plenty and the excess capacity may force it to not only lower its rates but also keep them consistent and realistic for a long time to come. The present room rates at some hotels are still too high, as they are still living in a fool’s paradise instead of waking up to the reality of what has transpired in the last few months. Those that have indeed woken up and smelt the coffee stand to gain, and the sooner the rest of Dubai catches up, the better. By some estimates, Dubai hotels have lowered their room rates between 25 to 30 percent, in a bid to shore up occupancy rates. This strategy has certainly worked, as for expatriates in search of a job who are without living quarters, finding affordable hotel accommodation is the only other alternative. To compete effectively, the average hotel in Dubai has to reduce its rates. Business is slow, so hotels in Dubai are not really filling up. One can easily see this if one compares occupancy rates at apartment hotels in Dubai or Dubai hotel bookings of last year as compared to this year. In fact reports show that Dubai hotels booking rates are in sharp decline and the industry is in a quandary as to what to do about this issue.
What lies ahead for Dubai’s property market? The answers are not known, and anybody’s guess is as good as the other. The present state of the property market and the financial sector- once the precursors of Dubai’s growth- is at best uncertain. Various opinions float around the skies of Dubai, depending upon the giver’s experience and perception. What is alarming is that the stock markets both in Dubai and AbuDhabi have experienced rapid declines in trading sessions last week. A pallor of gloom hovers over the city, where tall skyscrapers glisten in the desert sun. Alas, the gleam could be short lived. In fact, many of the British and other expatriates who had invested in Dubai over the last few years in real estate have seen the value of their properties dwindle to at least half their original purchase price. And there are those who opine that given the current state of the market, the prices are still high and are expected to fall further. In fact the general consensus is that the property market will undergo a further downward correction of at least 30 percent before rebounding. It’s best to sit tight and wait if one can, since all this is expected to occur within the next six months or so. Those who can hold on to their investments will definitely stand to gain something. This is the opinion of the majority of Dubai property management dealers all across the emirate. So it really does not matter if you have invested in Dubai furnished apartments or Dubai holiday apartments or even Dubai hotel apartments, the general consensus is that you will gain, or at least have the chance to recover your investment if nothing better, once the correction has occurred. The same goes for schools in Dubai. On the positive side, some real estate advisors and developers such as Colliers International Dubai have reported a rise in activity in respect of transactions occurring over all sorts of real estate deals in Dubai. In fact properties still open for foreign investment have seen an increase of 7 percent in investment over 2008. Though construction activity in Dubai is nowhere near its previous peak, builders are still completing some projects to meet delivery deadlines. On the whole it is estimated that occupancy rates for new projects in completion will not be more than 25 percent. Sooner or later, Dubai will itself have to work its way out of the present crisis. Harping on the debt liabilities of Dubai World will die down soon enough once the company presents its new plan to the creditors meeting this week. That settled, the stock markets should recover forthwith and with it some investor confidence will return. The remaining problem, analysts wonder, is whether this crisis is just the tip of the iceberg. The answer is that Dubai has enough foreign reserves to withstand the present crisis if need be. Being the world’s sixth largest holder of foreign exchange reserves, as well as having sizeable investments all across the developed world, Dubai as an emirate and even Dubai World as an entity have the ability to withstand and recover from the present scenario. All the expatriates have certainly not left the emirate, as evidenced by those being seen in the supermarkets and their kids in Dubai schools and some still have faith and hope that Dubai will rise to its former glory once again. We can only wait and see.
The fate of Dubai, it seems, is in the hands of the gods. In a world where perceptions matter more than reality, Dubai has been hit hard and heavy by the present financial crisis. Ever since the news of Dubai World’s liability hit our screens, our lives have never been the same. The news of Dubai World’s US$60 billion debt made headlines all across the globe, and the world waited with bated breath about what would happen next.
Given that Dubai has the world’s sixth largest foreign exchange reserves it would be wise not to worry. Dubai can pick itself up from any financial mess without more than a shrug, and that’s a fact. Therefore the Western nations are wrong to think that Dubai or the UAE is on the brink of another financial disaster. Far from it, the current scenario presents many opportunities to pick up properties at bargain prices.
Life in Dubai has certainly been affected by the downturn in the economy. On the wings of this storm, many expatriates in the housing and finance sectors have been forced to leave Dubai. Attendance in many Dubai schools has dropped, with the outflow of expatriates. The loss has been felt acutely, prompting some schools in Dubai to even offer schemes where parents can pay fees for their children in easy installments.
Even Dubai property management experts seem nonplussed. But even in the face of these realities, there are profits to be made. Some of the cash hungry investors are keen to relinquish their holdings in the property sector and are eagerly looking for buyers for Dubai apartments and Dubai holiday apartments. Even the owners of some Dubai hotels and apartments have resorted to offering their rooms on discount, depending on how long you would want to rent it for. The longer the stay, the more the discount- and free breakfast is usually included.
The latest news is that the fear of Dubai World defaulting has been averted. There is a meeting on the cards with its creditors next week, at which it will be proposed to restructure US$26 billion of its repayments for the next six months. With that done, Dubai World will have to gear itself up to match its liabilities with its assets, may be divesting some of its properties and holdings the world over. That may be likely to cause a shakeup in some part of the Western world. Quite well deserved it will be too, considering all the hue and cry that the West has raised over this issue.
Back in Dubai, there are still a number of things that can be done before Dubai can truly bounce back for the long term. The three year residence visa, which had drawn many people into investing in Dubai rent, has been replaced by a six monthly multiple entry visa, which is not only more expensive but also involves a lot of tedious paperwork. This sends negative signals to potential investors.
If the Government offers incentives to companies to establish shops in the UAE, commercial activity will get a boost, and in turn create job opportunities, increase consumer spending and multiply housing needs. Similarly financial institutions and trading companies add to the flow and circulation of wealth in an economy. But more than ever, clear and transparent regulations will ensure that both buyers and sellers are protected at all times.
|
RSS Feed