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‘There should be apple to apple comparison’

September 2016

Ismail Al Hammadi, Managing Director, Al Ruwad Real Estate, Dubai, says it’s very difficult to say Dubai property market has gone down or up, as different locations in Dubai are going through different price cycles

How do you assess the overall property market in Dubai?
Dubai property market is a big market which is divided into many segments. Every segment has different potential and competition. It is not possible to give a generalized opinion about the market. Every week, every month there’re a number of research reports that are coming up regarding Dubai real estate. A month is very short interval to judge or predict something about real estate. This is real estate market not stock market. Most of the reports lack specific details such as, which area and which type of property prices have gone up or down? Instead they paint a generic picture of the overall Dubai property market, which in my opinion, needs to be looked into. It’s very difficult to say Dubai property market has gone down or up, as different locations in Dubai are going through different price cycles. For example, if a property owner leases out his property at AED 50,000 a year, while his neighbor is leasing at AED 70,000, it doesn’t mean the whole of Dubai’s rents have gone down, nor does it mean the former owner is making any losses. At the end of the day, it’s up to the property developer or the owner to decide at which rate he’s happy with.

As a matter of fact, each property owner leases out his property keeping in mind factors such as his budget, the cost of construction and other overheads. Based on these factors, he decides the rate to lease out his property. This rate can vary significantly from one owner to another and from one location to another, hence different rentals and sales prices. In a nutshell, there should be apple to apple comparison when it comes to assessing Dubai property market, which is not happening. I believe Dubai is a brand and it’s not apt to paint the entire market with the same brush.

Is the fall in the oil prices the biggest dampener affecting the launch of real estate projects in Dubai?
Dubai is not an oil based economy. I don’t think oil is a major factor impacting property rates in Dubai. This is simply because Dubai’s dependence on oil accounts for just around 5% of its GDP, which is too insignificant to affect ongoing and planned government projects. So far there hasn’t been any government project that’s been postponed or shelved in Dubai. The robust Dubai’s economy is built on tourism and commercial activities, and real estate is one of the main part of commercial activities. Nonetheless, oil does come to play as a factor on a pan-UAE basis. I haven’t seen any Dubai developer that has reduced property prices because oil prices have come down. I haven’t also seen any company being closed down due to the so-called slowdown. On the contrary, every month Dubai is seeing 1000-2000 new companies getting registered.

Is oversupply still a major factor pressuring prices even after various developers have cut down on their projects?
There’s no oversupply in Dubai property market as Dubai is building for the future. Dubai Statistics department data says every year the population of Dubai is increasing by around 300,000. This means the demand for property is increasing and that’s why any research on Dubai property needs to look at the supply and demand dynamics in the market, for both locals and expats. The emirate has to keep on adding new hotel rooms to accommodate the future tourists. I often find it self-contradicting statement when one-day people say, Dubai needs to increase the number of hotels for Expo 2020, while the next day they say, do you know we had just 60% occupancy this year? I want to ask these people, “When all hotels in Dubai have 100% occupancy, how will you talk about attracting new people to the emirate?”

Do you believe there’s a significant gap between what an affordable property is and what is available in the market?
I don’t think there’s any gap. Every property segment such as luxury or affordable has its own set of customers. In affordable property segment developers are coming with innovative solutions for every need. In affordable housing segment Dubai is providing best space management option with all the technological advancements. Similarly, there are projects which are designed to keep HNWI’s (high net worth individuals) in focus. These projects are much discussed in national and international media due to special offerings. Due to the attention of media luxury projects become talking point and aspiration for many individuals. It does not mean that affordable housing solutions are not available in the market.

Are smaller developers finding it a bit difficult to arrange funding from traditional sources like banks than the big players who have strong balance sheets?
I don’t see any property developer is going with self-finance and it’s all about escrow account and off-plan sales. Just a handful of them are digging into their own cash reserves.

Ismail Al Hammadi A Profile
Ismail Al Hammadi, founder and Managing Director of Al Ruwad Real Estate and Biznet consulting. He is a dynamic business leader and motivator for budding entrepreneurs.  He pioneered the concept of real estate consultancy. During his professional journey of two decades he has got versatile experience of serving different government and semi government departments on various responsible positions.  His dedication and hard work credited him with an iconic image. He is known as an expert real estate professional and a veteran business consultant.

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