Major real estate developers in Dubai, who were facing financial losses during the times of global financial crisis, have now delivered strong profits, indicating that the property crisis in the emirate is easing out.
Although the market still seems oversupplied, with half-empty buildings noticed along the skyline, the recent house price data and earnings show a picture leading to growth.
Four years, after the property market hit its peak, following the construction freeze, the developers are now seen completing their projects, and buyers have returned to the market. Dubai has been further benefited by the Arab Spring that boosted demand for regional havens and the vibrant tourism sector that improved confidence in the emirate.
The government-owned real estate developer, Nakheel, shook global markets back in 2009, when it nearly defaulted on its debt, reporting 36 percent increase in net profit during the first six months. Handover of completed properties improved the outlook of the company, too.
Meanwhile, the Emaar Properties, developer of world’s tallest tower, received a boost with income from malls and hotels. The company's second-quarter profit doubled, thereby beating estimates of analysts.
Following the financial crisis, real estate prices in Dubai have more than halved. Cheap credit dried up and owners defaulted on payments. Although confidence has returned, several projects continued to remain stalled, including those in Dubai Waterfront, Palm Jebel Ali, and numerous other tower blocks. However, the latest report from Knight Frank and Jones Lang LaSalle (JLL), the property consultants, indicate that there are incremental increases in real estate prices in Dubai.
The prices grew 5.6 percent in the past six months, while prices of apartments in the emirate grew by 2 percent in the second quarter of the year, revealed the latest Knight Frank Prime Global Cities Index.
The latest report by JLL states that villa prices have grown by 21 percent year-on-year, while apartment prices are up 1 percent. According to real estate agents, prime locations are most benefitted from the Arab Spring effect.
Better fundamentals are now prompting developers to begin new projects. JLL revealed that 24,000 new residential units are likely to be ready by second half of this year, adding to current stock of 344,000 units at the end of first half.
Majority of the forthcoming residential units are being handed over by Nakheel, which has received a $9bn funding from the government, as part of its $25bn restructuring of its former parent, Dubai World.
Meanwhile, Emaar is moving ahead with fresh launches, including new towers in Burj Khalifa. The developer has also announced purchase of land adjoining its Arabian Ranches community to meet further expansion plans. Half of Emaar’s revenues are now from rentail, retail and hospitality, as the company has diversified from home deliveries alone.
Nakheel has also announced plans to diversify into retail with launch of new shopping centres on Palm Jumeirah and expansion of its Chinese wholesale mall on the outskirts of Dubai.
Another leading Dubai developer, Union Properties, has reported a net profit of Dh.106mn, thereby reversing its Dh.439mn loss for the first half of last year. Speaking on Dubai property market, the Chairman of Union Properties, Khalid bin Kalban, said that a positive trend has been noted in revival of the market, with better value in rentals. Union Properties is also on its way for more retail development.