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Dubai ponders how to rebuild confidence in local real estate

 Re-building confidence in the Dubai property sector was the subject of the Cityscape Connect Business Breakfast in the Grand Hyatt this morning, and the highly professional tone of this event seemed to immediately contribute towards its objective.

However, Rome was not built in a day and confidence in the Dubai real estate sector is not going to be easy to put together after the boom which burst last September, an immediate victim of the global financial crisis, although arguably a local bubble had been growing for more than a year.

End game

The first step to re-building confidence is to see when this slump might end. Deyaar CEO Markus Giebel thoughtfully compared the Dubai slump to Singapore in 1997 which then suffered a two-year slump with prices down 60 per cent, and even 10 years later was only at 65 per cent of previous peak values.

Giebel believes Dubai will make it out in just 18 months because of proactive government intervention. But Heather Wippperman, Investment Boutique CEO, pointed out that Singapore had a much larger resident population than Dubai whose expats have to leave if they lose their job.

She held that ‘transparent’ pricing was also essential to getting the market back on its feet with clear records of asking and selling prices. At the same time, Simmons & Simmons lawyer Duane Keighran noted that new regulations and laws were making good progress, and should help confidence to recover more quickly than otherwise.

Within the industry several pleas were made for developers, and especially the government developers, to pay their bills to ease financial pressure on the supply chain.

Consolidation process

Consolidation of the sector into fewer, larger and better capitalized groups is another side to this process alluded to by several speakers. And it was expected that banks will begin to foreclose on some concerns within a few months.

On the whole, this was an upbeat seminar with plenty of suggestions for clearing up the mess that the bursting of the Dubai bubble has left behind. But as the MD of Al Futtaim Capital Marwan Shehaden said the extrapolation of upcoming supply and population trends leaves considerable room to doubt a rapid recovery is in prospect.

He noted that there is large supply of new residential and commercial property to be absorbed and that only lower rents and capital values will ensure that this is taken up, and only then will the Dubai property market be stable.