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The latest delay to arguably the most high profile Dubai real estate project of all, The Palm Jumeirah, is both a factor and a demonstration of this process writ large. Nakheel will now deliver 500 out of 3,900 apartments in November - six months late, 25 per cent by the year end, 75 per cent by April and the remainder by June 2007.
Buyers on The Palm, Jumeirah have been offered the option of the original sale price back plus interest. However, as prices have more than doubled since the project was launched there have been no takers.
Reputation damage
This sort of failure to deliver on promises does not enhance the reputation of Dubai developers, and at the margin it could dissuade some international investors from becoming involved. But for many market participants it is just something to be expected in the advanced stages of a major property boom and with a project as complicated as a huge land reclamation.
Indeed, this is the normal pattern seen in emerging market construction booms. A rush to develop followed by high levels of construction cost inflation and then late delivery, though the profits already made by most buyers of Palm Island property will ensure that few complaints become public.
What is more interesting is the knock-on effect on the rest of the real estate market mentioned at the start of this article. It is another fact of life in the Dubai property market that real estate prices and rentals are continuing to rise this autumn.
Prices still rising
The price of a one-bedroom flat in The Greens is up by $27,000 since the summer and Meadows five-bedroom villas by $40,000, for example. How much of this is due to construction project delays, and how much is due to the pressure of new arrivals in Dubai is hard to tell. But both are clearly factors and as long as both continue so will the boom.
Property crash forecasters will surely be right in the end, but when? And how much in rent will would-be local buyers have paid out by then?
Those siren expatriate voices from the UK who sold their UK homes in 2000 expecting a property crash should remember that history has a habit of repeating itself, and that real estate booms can run on for a lot longer than is generally expected.
What if oil prices stay relatively high for the next few years and the Middle East economic boom holds? Then we can put back the year of the Dubai property crash yet again, especially if more projects get delayed as seems inevitable and people continue to migrate to Dubai from other parts of this troubled region.
Peter J. Cooper
