AFP: Dubai, a city defined by its glittering towers and man-made islands, is stuck in a five-year property downturn with no end in sight, drawing warnings of an industry reckoning that will see weaker players fail.
Property developers are slashing prices and offering ultra-easy financing to lure customers, while concerned authorities have stepped in with incentives and regulations to revive the crucial sector.
Ahead of the Expo 2020 global trade fair that Dubai hopes will deliver an economic windfall and some 300,000 new jobs, hundreds of mega projects have been unveiled in recent years, leading to an oversupply and a slide in prices.
The government rushed to rescue the sector in 2018 with a raft of measures including easy visa terms for expatriate buyers and permanent residence permits for big investors. This month, a top-level committee was established to rebalance the oversupplied market. The Standard and Poor’s ratings agency has said the industry, which makes up 7.2 percent of Dubai’s economy, may not stabilise before 2021.
“Over a period of time, some correction will happen,” exposing the strong and the weak in the industry, said P.N.C. Menon, Chairman of Dubai-based multinational developer Sobha Group. The process, which will leave only the strongest firms standing, is likely to last for another three or four years, Menon told AFP at an industry expo where his firm was showcasing its latest multi-billion-dollar project, an 8.0 million square feet beachfront development of luxurious apartments and high-end townhouses.
Like Sobha Group, dozens of local and international property firms taking part in this week’s Cityscape Global event were offering unprecedented payment terms to drum up business. Buyers are being asked to stump up as little as five percent of the value of the property, down from 25 percent in the boom times, and pay the rest over 10 years or more straight to the developer -- without the need for a bank mortgage.
In a sign of the desperation, developers are also offering to cover the costly 4.0 percent municipality registration fee.