The man playing the gold-plated piano on the Meydan stand at this year’s Cityscape exhibition in Dubai was reminiscent of a scene in the blockbuster film Titanic: as the famous ship sunk, the band played on.
The pianist was the only reminder of the exuberance that used to define this property show. Once upon a time, crowds came from near and far to get a glimpse of the ambitions of Dubai’s property developers.
Enticed by glitzy displays of model cities, they queued for hours at stands, eager to put down a deposit on a property that was yet to be built and which they probably couldn’t afford. Developers spent millions of dirhams pulling out all the stops to ensure their wares received the attention they needed. As competition intensified towards the middle of 2008 in the run-up to that year’s extravaganza, the chief executive of one newly created developer even alluded to the possibility of the singer Madonna gracing his stand with her presence at the event that October. While celebrities including the actor Antonio Banderas and racing driver Michael Schumacher were actually seen doing the rounds of the exhibition halls that year, there was no sign of the material girl. However, even as new, flashy projects were announced, signs of nervousness among investors began to creep through the showcases of Cityscape Dubai 2008. Just a few weeks after the show, which has now been rebranded Cityscape Global, property prices in some areas of Dubai fell by as much as 40 percent.
The global financial crisis had caught up with the emirate. By the end of that year, hundreds of projects worth hundreds of billions of dollars were cancelled or put on hold while thousands of jobs were cut across the property and affiliated construction sectors. The same developer who claimed a close connection with Madonna suddenly went out of business.
Developers who had once enjoyed easy credit had to wake up to the new reality, and quickly. Rather than rushing to the bank to cash deposit checks, they were instead summoned to deal with disputes raised by unhappy property buyers, who were coming to terms with the reality that they had plowed money into buildings that would never be built.
Strapped for cash, developers have also struggled to make payments to their construction suppliers, with many taking legal action.
Still, it hasn’t all been bad news. A lot has happened over the past two years to clean up the property sector. Dubai’s Real Estate Regulatory Authority has been swift to implement new regulations, while developers keen to protect their reputation have helped property buyers consolidate their investments.
Projects are also starting to be revived, and Nakheel, the Dubai World-owned developer that is responsible for a large share of the emirate’s property development, said at the end of September it would complete its debt restructuring by the end of the year. Tamweel, one of the country’s largest mortgage providers, will also soon resume lending after Dubai Islamic Bank increased its stake in the firm.
There are still challenges ahead, with a potential oversupply of property one of the biggest threats to recovery. The most startling information to emerge from this year’s Cityscape was that another 9,000 homes would flood the market by the end of this year, while a further 35,000 homes will come on stream next year, according to figures from property consultant Jones Lang LaSalle.
But probably the greatest hurdle is reviving confidence among property investors. Thousands of people have been stung, with many now using events like Cityscape to vent their frustration on hard-to-reach developers or find fellow investors in the same predicament. Buyers will only re-enter the market when they believe the issues have truly been resolved.
The collapse of Dubai’s property sector can hardly be compared to the catastrophe of the Titanic tragedy in terms of loss of life, but it’s going to take a lot more than soothing music to lift the spirits of those who have had their fortunes sunk.
ANGELA GIUFFRIDA is a
property correspondent in Dubai