Whilst the Gulf states continue with business as usual by supporting fuel subsides in order to avoid political unrest, there are some areas of luxury in the Gulf which will have to be cut back. In Dubai, the property market struggles means that for now at least, it’s back to basics. Having constantly bemoaned the brash ‘I-can-build-it-higher/bigger/more-expensive/out-of-gold’ madness that the Gulf states seems to suffer from, I am more than happy to see a return to a more modest United Arab Emirate.
As Media Line reports “gone are seven-star hotels, near-mile-high skyscrapers and artificial islands shaped like palm tree and the countries of the world.” Mega-malls and huge hotels, which only ever appealed to the well-off tourist, are already being slowly overtaken by supermarkets and retail centres for residents and budget hotels.
And this is a good thing for everyone as rather than focusing on gimmicky concepts; the property sector will start focusing location and quality construction.
Global property experts Jones Lang LaSalle (JLL) have reported that developers and managers are making the transition “from return on ego to return on equity.” JLL also added Dubai’s market should begin to stabilize this year as the hospitality industry focuses on profitability and asset management.
So far, capital values have declined across all segments of the property market in Dubai and Abu Dhabi during the final quarter of 2010.
Experts have pointed out that building more property will only aggravate the oversupply situation and contribute to a further slump in prices. It has been estimated that around 25,000 new homes will be built in 2011, which is a significant fall from the 36,000 homes delivered in 2010.
Marwan bin Ghalaita, chief executive of the Real Estate Regulatory Authority (RERA) told Reuters that 115 property projects had been scrapped since the financial downturn and billions of dollars worth of projects were put on hold and cancelled.
Let’s hope that this downturn sends a clear message that uninhibited growth and fanciful projects that don’t take into consideration the surrounding world are just not real options anymore.
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:: Image via Uggboy on Flickr.