Dubai Property Project Cancellations & Suspensions In U.A.E.

Things change quickly in the world of property, and no where has this proven more true than the Dubai real estate market these past few months. It was not long ago that Dubai property looked unstoppable, with buyers showing an insatiable appetite for UAE real estate, and Dubai developers move than happy to accommodate this demand with new projects seemingly being launched every other day, each one bigger and better than the last. But how things can swiftly change from good to bad, and we all know what happened next don’t we? Dubai had always seen itself as somewhere immune to the problems being experienced elsewhere around the world, but the combination of a property market artificially inflated by speculators and then the world economic crash brought everyone down to earth with a large thud, especially Dubai’s developers, who are now really feeling the effects of the credit crunch in a big way.

The manifestations of this have come in the form of numerous project delays and cancellations. What started out as a trickle of project delays has now turned into a surging stream of project cancellations that have affected more than just Dubai’s smaller developers. The likes of Emaar, Nakheel, Damaac and ETA Star have all joined the party with its ever growing guest list. A combination of the world economic recession, low oil prices, a lack of liquidity and the resulting job cuts of recent months have all come together to leave many Dubai freehold real estate projects with uncertain futures. So how much property has met with problems? Well estimates vary from $75 billion according to a HSBC report last week, up to a rather substantial $260 billion worth of property being delayed or cancelled according to Morgan Stanley.

At the end of 2008, it was estimated that there was something like $1.25 trillion worth of property undergoing construction in Dubai according to Middle East Economic Digest. However with difficulty obtaining credit and falling demand from investors for Dubai property, many developers have been forced to reassess projects feasibility. Even with the cancellations Dubai properties are expected to see an oversupply of residential property in 2009, which should further hit property prices. Property prices are so far estimated to have fallen in the region of 25% in Dubai, with some freehold projects seeing much larger falls in the region of 50%

The roll call of delays began in Q4 2008 and the rate of project delays has steadily been gaining speed ever after. And make no mistake; it is not just the smaller lesser known projects that have been hit, with some of Dubai’s most anticipated and hyped up property developments now also being affected. High end residential property projects and Dubai’s commercial property sector have been the biggest areas hit by delays and stoppages. To give an idea of how bad things have gotten, in the worst case scenarios, some projects have been cancelled despite seemingly been at an advanced stages of construction! There simply isn’t the credit available to finance the projects, nor the demand to make completion worth while, all of which leads to a very bleak outlook for those developers who were caught out by the speed of the downturn and credit crunch.

As previously mentioned, there have been some big name casualties of the property crash. Nakheel’s ambitious Harbour project, with its 1km tall tower, valued at near $40 billion always looked unlikely, but that is just one of many projects that look unlikely to ever reach completion. Meraas Jumeirah Gardens, a $98 billion project and the massive Meydan race course project have now all run into problems, as has the Palm Deira, the third of Nakheel’s headline Palm projects, which is currently on hold for the foreseeable future. Nakheel had earlier moved to reassure investors that the Palm Deira would be going ahead without delay, but even Nakheel has been forced to backtrack on this. But this is only the tip of the ice burg. Dubailand, aimed at spearheading Dubai’s assault of the world’s tourism markets has also met with numerous problems.

What was billed as one of the world’s largest theme parks, Universal City, now looks unlikely to be ready any time soon, and the much anticipated Falcon City of Wonders by ETA Star has been cancelled. Other Dubailand projects to meet with problems include AL Kaheel, The Dubai Wheel, Global Vilage, and Aqua Dunya. And with another 59 projects reportedly under review by developers, the list could soon increase!  These are certainly testing times for Dubai developers and the Dubai property market in general. However the market should emerge for the better on the other side, once all has settled down, in what are some are predicting will be 2010. However this will come as little consolation to those developers and their employees struggling in today’s unforgiving environment.           
 

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