Dubai developers feel effects of price uncertainty

The upheaval of the last few months, however, has brought about radical changes in their business models.

Developer Damac, the group behind 51 projects in Dubai alone, has already begun overhauling its organisation. An industry insider puts the number of employees at risk from the cut backs at close to 180.

Damac Properties CEO Peter Riddoch told AME Info: 'The continuing global slowdown will inevitably lead companies to review their staffing levels and recruitment requirements. Damac Properties will continue to review its own position in line with the market and aim to ensure that it right sizes/maintains its staffing levels accordingly.'

The company would not elaborate further on which departments were likely to be most affected, although insiders note that sales staff across the industry are likely to be placed under renewed intensity.

Industry rumours also suggest that Dubai powerhouses Emaar and Nakheel have also begun to downsize their employee numbers.

Real estate agency Better Homes is also said to be feeling the effects of the slow down in property sales, with cutbacks possibly affecting up to 50% of some of its departments.

However, when addressing a conference at the Dubai International Financial Centre last week, Sultan bin Sulayem ruled out the possibility of a fall in house prices in the emirate.

'The demand-supply imbalance persists and I do not see any downward trend in prices, despite the fact that some investors may try to sell lower,' said Sulayem. 'There is an appetite in the market but the will is not there.'

Despite these assurances the supply and demand imbalance does not appear to be having the desired effect. Many of the city's new districts, such as Business Bay or the Palm Jumeirah, though completed are still only partially occupied. This could be seen as a legacy of purchases by speculators or short term investors, which recent legislation enacted by the authorities has begun to curb in favour of longer term buyers and end users.

There have already been changes in the city's property market. In a move that would have been unforeseeable even two months ago, one developer has already put units in one of its projects up for sale at up to a third of the prices which were originally mooted.

Ukraine-based VIP Waterfront, the company behind the Royal Bay development planned in Madinat Al Arab's Waterfront, has gone ahead with the launch of sales for the project - but has put in place a pre-emptive price cut to tempt in investors. At Dhs2,300 per square foot, properties are now reportedly going for up to a third less than the group had previously planned to launch at.

In addition, properties in Business Bay have plummeted by as much as 50%. A two bedroom apartment in The Residency development is now being offered for Dhs1.53m, down from Dhs2.9m a month previously. Asking prices in the district as a whole are down by an average of 24%.

This is partially a reflection of the tightened access to credit, which had been fuelling many previous off plan sales, but is possibly also an indication that the new breed of investor in property in Dubai is the middle class that has so far been almost absent. The balance between speculators and end-user residents may have begun to change.

See also:
Dubai property agents consider impact of legal changes
What does the global financial crisis mean for Dubai real estate?