Dubai Property Construction Boom Cools

After so many years of rapid growth and development, it looks like things have finally caught up with the Dubai property market. For a long time it looked like things here would never stop, with new developments being announced on an almost daily basis, Dubai was expanding at a breath taking rate and property prices were shooting up. But as we now know, this couldn’t go on forever. There had already been a lot of talk with regards to an impending property downturn but the world financial crisis certainly gave the Dubai real estate market the push it required to start the fall. Since then liquidity both for buyers and developers has dried up, the results of which are being very much felt today. This has led the likes of Citigroup and Aseambankers to issue warnings about the risks of the current downturn being experienced in Dubai.

Whilst there is an expected 30,000 or more units to come onto the market this year, it is projects with completion dates after 2010 that are really feeling the heat of the current financial climate. The most recent casualty has certainly been a big one. The AED 4.6 Billion Meydan racecourse development was canceled last week, with principle partner Meydan LLC stating the construction firm has fallen behind schedule. The announcement has come as somewhat as a shock especially to the construction firm WCT Berhad, who had recently announced all of its work was on time, and as a result WTC will now contest the cancelation. Many are now speculating that the cancelation has more to do with Dubai’s current debt of USD 47 Billion more than its GDP. Many therefore believe the news that the Meydan project will no longer be moving forward is a strong sign of Dubai struggling with its current weakened financial situation.

This all follows on from the recent news that Nakheel, Dubai’s government owned developer was seeking out finance for the sub developers working on its headline project, The World Dubai in order for the project to be able to move ahead. Numerous other developers have come out to cancel or put project on hold as everyone struggles with the credit crunch. In the long term this slowdown in development may be beneficial to the health of the freehold property market but today it doesn’t help a property market that is already experiencing low investor confidence.