Dubai: Even with a 25-30 per cent decline in transaction volumes, Dubai’s property market can continue to do Dh40 billion-plus a year. And that number will still leave enough room to squeeze out year-on-year growth in the 3-4 per cent range, according to a top developer.
“At Dh40 billion to Dh50 billion a year, Dubai’s real estate is still a gold mine for developers,” said P.N.C. Menon, Chairman of Sobha Realty. “It’s still possible to build and sell about 20,000 units a year, and developers should be fine with that. It needn’t be that a good year for the property market can only happen with double-digit growth rates.” In the year-to-date, new off-plan launches have been limited, and more so when compared to the pace Dubai’s developers maintained all through last year. This year’s drop in releases has given the off-plan market some time to cool off, because the last thing anyone needs to see is new supply overwhelming weak demand.
Menon wouldn’t say whether developers should stick with this strategy. “You cannot stop any developer from launches — the only thing that will force change is when developers start losing money. When the capacity is not there, they will fold up as part of the natural process. That will also remove some of the clutter of developers.”
Over the last three quarters, demand for Dubai’s luxury homes and ready properties have started to show improvements. It is likely that the next few weeks could see developers come out with limited launches of high-end residential units. Meraas has already made a start with the first homes at its La Mer beachfront destination.
In a recent interview, George Azar, of Gulf Sotheby International Realty, said that the sharpest decline in sales volume has been happening in the Dh1 million to Dh3 million space. But when it comes to Dh10 million and over, there is a good deal of demand from overseas buyers. “Right now, that’s where the real action is in Dubai realty,” said Azar.
According to Sobha estimates, the premium to high-end category of homes contribute about Dh8 billion in volumes in a good year. “If we attain Dh2 billion of that, it should keep us in a good place,” said Menon. “This year we could finish with about Dh1 billion and expect Dh1.5 billion next year — the breakthrough we expect will be in 2020 when we can do Dh2 billion.”
The developer has got two large-canvas projects at MBR (Mohammad Bin Rashid) City: District One, which is an equal joint venture with Meydan, and Sobha Hartland. It has a land bank that translates into 20 million square feet of GFA (gross floor area) for the next 10 years.
“The last of the land was acquired in 2014 — we will not be acquiring any more for the next few years,” said Menon. “At 2 million of GFA built each year for the next 10, we should be doing OK. Anything more than that would be an overkill and create undue stress.”
A Dh1b tower is still part of the Sobha strategy
Plans to build a signature tower and costing around Dh1 billion to build MBR City is still on the cards, says its Chairman.
“We have not shelved those plans, but we are not going to rush and build it,” said P.N. C Menon. “The way I see it, the tower will be split between a hotel and serviced residences, with the apartments priced from Dh1,800 a square foot. I want to get everything down right before starting on it.”
