Buyers want more in Gulf property boom

The 2007 FutureBrand Gulf Real Estate Study has found that the value of property construction projects has increased 59 per cent to $143bn. But in a black mark for developers, just four per cent received a passing grade in the four areas they were tested on by mystery shoppers - for their phone practices, sales centres, sales people and collateral materials, such as brochures.

And while Emaar and Nakheel occupied the top two spots for familiarity in FutureBrand's survey on property brands, they were less well regarded for conversion from familiarity to sales when compared to rival companies, although they still scored highly. Sorouh topped the table with 91 per cent, with Emaar bottom with a respectable 59 per cent.

But worryingly for the main property developers in the region, when asked about reliability, Emaar topped the table with mere 25 per cent, while Nakheel came second with a paltry eight per cent. FutureBrand said the numbers 'suggest that most respondents do not feel that developers are reliable in their offerings'. Sorouh, Damac and Dubai Properties all came joint bottom, with just a three per cent rating for reliability.

Rina Plapler, executive director at FutureBrand, said: 'Reliability numbers are the lowest across the board, suggesting a category wide disconnect between time promised to complete a community/development and time delivered. Since most end-users are particularly sensitive to move in dates - for stopping rental contracts, buying furniture, turning on utilities and so on - it's understandable the reaction is demonstrated with lower rankings.'

Dubai's developers fared better than counterparts in other countries, suggesting that they have matured with the boom, but there was still 'substantial room for improvement', the report said.

While real estate projects across the region grew rapidly, it is Dubai where prices - and revenues for associated industries - has rocketed.

According to the Dubai Land Department, land prices have risen 64 per cent over last year, while the value of mortgages rose 170 per cent compared to 2006, reaching $1bn - and it will be cold comfort to those renting in the city to know that it is now the 14th most expensive city in the world in which to do so. Development project in progress and planned increased by 79 per cent in the emirate.

This is unlikely to stop people moving in though said Plapler. 'Some companies will look to other emirates for cost savings, as well as employees. However, Dubai will still be the place to be for many global companies, which are looking for a bustling, cosmopolitan city to be based in. Office space is in tremendous demand, suggesting there are still plenty of corporations that will continue to pay Dubai prices.'

But while Dubai grabs the headlines, other regions are equally in boom mode. Bahrain experienced a 27 per cent growth in its real estate sector, Oman and Qatar saw a 10 per cent rise in the residential market, sales in Kuwait went up 67 per cent and Saudi Arabia claimed $260bn in real estate investments. It is now the fastest growing region in the Middle East for real estate and second only to Shanghai in the world.

In Dubai, the property boom is not all good news and the report warned of a potential backlash against the emirate. 'Rising inflation and cost of living is a threat to Dubai and an opportunity to neighbouring locales. Some companies are now less prone to relocate to Dubai due to spiralling costs,' it said. This reflects the results of the AME Info Buying Property in the UAE survey, which found that while Dubai was the most desirable location, prices were forcing people to look to other emirates such as Sharjah and Ajman.

Financing options are increasing, and the recently the escrow law, which was introduced this past summer and will come in to full effect in late December, is seen as a positive for buyers - by creating more confidence. The law requires developers to protect investors money by keeping it in an escrow account and using it only for that project, rather than to finance other projects. The report said it may complicate business, particularly managing cash flow, for developers though.

The Dubai population is predicted to rise to 2.5 million by 2015, while Abu Dhabi's will double three million by 2030. As major developers in the UAE build their name and reputation, they are beginning to move into other countries. Emaar, for instance, has launched $110bn of projects outside the UAE, including in the US. Nakheel, most famous for its Palm island projects, has moved into China, Pakistan and Vietnam.

Download report the FutureBrand Gulf Real Estate Study

See also:
All Cityscape news
Special Report: Buying Property in the UAE
Green buildings LEED eco-construction