Dubai real-estate prices will continue to drop as the United Arab Emirates’ second-biggest sheikhdom absorbs an oversupply of homes and offices, said Mohamed Alabbar, chairman of Emaar Properties PJSC.
“We need 20 months or so to go over the excess supply,” he said during a panel discussion at the Bloomberg Link Real Estate Briefing today in New York. “Rates in Dubai about a year and half ago were a little higher than New York, which is abnormal.”
Property prices have dropped by more than half in Dubai and by 30 percent in neighboring Abu Dhabi as banks tightened mortgage lending and speculators fled the market. Emaar along with state-owned developer Nakheel PJSC spearheaded Dubai’s building boom.
Emaar plans to generate 50 percent of its income outside its home market in the next few years, Alabbar said. Syria, Lebanon, Algeria, Saudi Arabia and Egypt are the best countries for the company, he said. Currently, more than 80 percent of the developer’s revenue is generated in Dubai.
Financial pressure is building on developers in Abu Dhabi, the largest of the United Arab Emirates, after the government aided some by purchasing stakes in projects. Aldar Properties PJSC, the emirate’s largest developer, will need 9.8 billion dirhams ($2.7 billion) by 2011 to “survive,” Bank of America Merrill Lynch said.
“We are seeing demand for greater financial discipline from Abu Dhabi developers,” said John T. Livingston, president of Tishman Construction Corporation, said at today’s conference. Tishman advises on projects such as the Abu Dhabi Golf Resort.
Abu Dhabi has benefited from more thorough development planning than Dubai, where there was greater speculation, according to Jeff T. Blau, president of Related Companies.
“If you look at the plans, Abu Dhabi really had a vision. They laid it out for 25 years,” Blau said at the real estate briefing. “It was smart, it was concise and it was slow.”
Dubai first allowed foreigners to own property in 2002. Real estate prices quadrupled in the following six years, helped by a growing expatriate workforce and speculation fueled by borrowing.
“We have a unique combination of what we call first-class economics and wealth with third-world demographics and growth rates,” said Karim El Solh, chief executive officer of Gulf Capital, a U.A.E-based private-equity firm that’s in partnership with Related on a regional development venture. “When combined those two together are very potent.”
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