Boom promotion now in the hands of secondary property developers
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Boom promotion now in the hands of secondary property developers

Boom promotion now in the hands of secondary property developers

Read the adverts for Dubai property these days and you will note that the most frenzied advertising is by secondary property developers. This is the period of the traditional summer lull in Dubai real estate, and the real question is whether such developers can lure the buyers back this autumn.

    However, it is notable that the state controlled developers like Nakheel and Emaar have cooled their releases of new property into the market this year, while the secondary developers are vying with each other for attention.

    We have super luxury penthouses in super high towers. There are rotating skyscrapers; highly priced luxury villas; and unique communities in secondary locations. It is almost as if there has been a competition for the most extravagant scheme to attract buyers.

    Off-plan sales slow

    But agents report a significant slowdown in Dubai off-plan property sales this year. Hence there is more and more advertising from the secondary developers, whose project financing may well rely on levels of pre-construction sales that are now looking ambitious.

    What will happen if these pre-construction sales do not emerge? The now famous EFG Hermes report published last December had the answer.

    It suggested that many of the schemes now being promoted by secondary developers will not actually get built. Buyers will then have to try to get their money refunded.

    This means that the caution in the market seen today about committing to new schemes from secondary developers is entirely understandable. For it is as true in real estate as in any business transaction that you should be careful about the financial condition of your business partners.

    Good deals?

    It is also sadly a fact that whenever somebody offers you a deal that looks to good to be true then usually that is because it is too good to be true.

    On the other hand, if the oil price stays high for a few more years and the expansion of Dubai stays on track it could be that property prices head even higher and those who buy now will be amply rewarded in the future. That has certainly been the experience of those who bought in 2002 when the freehold expatriate market was launched.

    But real estate is a notoriously cyclical industry, and around the world the boom-to-bust pattern has been repeated endlessly since modern history began. It is always a matter of judgment as to which phase of the cycle a market has reached, and to be fair real estate booms can last a lot longer and surge much higher than generally expected.

    However, it is also a truism that as property booms grow the returns for developers and buyers are gradually squeezed over time and then finally become strongly negative. And if anybody can think of a property market where this has not happened or that has rewarded latecomers better than the pioneer investors then please let us know!
    AMEinfo Staff

    AMEinfo staff members report business news and views from across the Middle East and North Africa region, and analyse global events impacting the region today.

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