The region’s most important real estate event could show off even fewer launches than last year due to subdued market conditions, analysts have said ahead of the exhibition.
The Dubai-based Cityscape Global real estate exhibition last year braved up to a decrease in market size, owing to tough macroeconomic conditions in a climate of low oil prices, liquidity challenges and reports of shrinking revenues in the construction industry.
The backlog of work in the United Arab Emirates (UAE) shrunk by around $17 billion in 2016, according to Faithful+Gould’s Construction Intelligence report, published in July.
Cityscape Global’s exhibition director Tom Rhodes last week said that sentiment has shifted for the better, with Dubai’s real estate industry adjusting to lower oil prices and adapting accordingly. But some analysts argued that the market has not recovered, with fewer new project launches expected at the event this year.
“There has been a little bit of talk in the press with press releases from various developers about schemes they’re going to be launching (this year) but I think these aren’t the sort of vast, master-planned communities that we saw at last year’s Cityscape,” Faisal Durrani, head of research at real estate consultancy Cluttons, told Thomson Reuters Projects in a phone interview last week.
“I think one of the biggest ones we saw last year was probably Emaar South, where they announced something like 15,000 units. I don’t think we’re likely to see anything of that scale this year, but, then again we could be surprised.”
Cluttons said in its UAE Property 2017 report released last week that “subdued residential market conditions have curbed developers’ appetite to bring forward new schemes”.
Announcement vs. delivery
According to Cluttons’ estimates, just over 1,600 units have been announced so far this year, against just over 34,000 last year.
“I think we’re seeing less launches this year because conditions remain subdued and I suspect there is a little bit of caution from the developers on the market’s ability to absorb the number of units that are already in the pipeline,” Durrani explained.
Between now and the end of 2020, about 90,000 completions are expected, he said.
Durrani added that it is “very likely” that developers will “sense check themselves” and phase things according to demand over the next three to four years.
“Although we’ve got 90,000 units in the pipeline, it’s unlikely that we’ll see that full amount being completed in the next four years,” he said.
“I would say anything that’s two years away from completing is very likely to complete on time. Anything beyond that, as we’ve seen before, developers do tend to look at re-phasing or a fall in completions, in order not to stifle the market with too much supply.”
Rival consultancy Core Savills' CEO David Godchaux echoed Durrani’s caution on potential completions.
“We have to remember that only 40 percent to 50 percent of what has been announced every year over the past five years has been delivered, has come to the market,” he told Thomson Reuters Projects in a phone interview last week.
But that’s not necessarily a bad thing, he added.
“Without this adjustment possibility, we could potentially have an oversupply problem,” Godchaux said. “Developers have been very smart in adjusting the delivery and phasing out what is required based on the absorption and that’s specific of Dubai, which makes me relatively confident about them continuing to do that as required.”
However, the market sentiment could potentially impact developers’ decisions to launch new schemes.
“Less strong sentiment means developers will also probably want to adjust to that and maybe start bringing [forward] less projects... it remains to be seen,” Godchaux said.
In its annual Residential Sentiment Survey released last week, Core Savills noted that the overall market sentiment was “slightly down” from 2016, due to higher uncertainty from respondents.
Only 34 percent of respondents said they believed that Dubai’s real estate has displayed signs of recovery, while the 2016 annual survey showed a more convincing 50 percent.
Eight out of 10 of this year’s respondents who disagree on visible recovery believe that Dubai’s residential market is expected to be oversupplied by 2020.
“Developers are being smart not to feed this feeling of oversupply in the market sentiment,” Godchaux said, adding, however, that he did not see the market as oversupplied, demonstrating a discrepancy between perceived sentiment and market reality.
Market recovery
Godchaux also attributed the relatively lower levels of sentiment not to pessimism, but a shift from optimism to uncertainty.
“Expectations were very high and a lot of market players are still in the mindset that Dubai should be seeing double-digit growth like it used to see when it was an early emerging market,” he explained.
“But it’s not an early emerging market any more. It has established itself over the past 10 years... and we cannot expect to see the market growing by the same rate or at the same pace of what we have seen in the past.
“But because a lot of people were expecting the market to recover last year, and it has not recovered as fast and as widely as a lot of players were expecting, they are now in confusion mode.”
However, Lewis Allsopp, CEO of Allsopp & Allsopp, disagrees with both of his counterparts, insisting that the off-plan market, in general, has performed “exceptionally well this year”.
“The market sentiment is good,” he told Thomson Reuters Projects in an email interview last week.
“It (the sentiment) will make a difference, as a lot of developers have held off launching projects and developments. They have also held back prime and premium units in other developments, again to release them at Cityscape. We expect a lot of interest, as our investors have been waiting to see what is announced and what is released in to the market at Cityscape.”
Onsite sales to create a different vibe
Cityscape’s Rhodes said he expected the decision to allow onsite sales at this year’s show to have a positive impact.
He added that approximately 30 percent of last year’s attendees were homebuyers and investors, while 68 percent of visitors confirmed they intended to make a purchase or conduct business with a company that they met during the exhibition.
Cluttons Durrani said the fact that organisers can once again offer sales at the event should “change the look and feel of Cityscape, and probably inject vibrancy into it that we may have been missing for the past few years because of the general quiet conditions in the market, which is so sentiment driven”.
Godchaux added that he expects some attractive discounts to lure buyers into purchasing on site, but cautioned that it was essential for end-users to do their homework.
“I would say that no buyer should ever buy anything in the heat of the moment when they have no prior knowledge of the market or what else is out there,” Allsopp added.
“I would go as far as to say it's quite reckless to do so.”
The 16th edition of Cityscape Dubai takes place on September 11 - 13 at the Dubai World Trade Centre.
For more data, analytics, tools and news on projects in the Middle East visit the Thomson Reuters Projects portal
© Zawya 2017
The Dubai-based Cityscape Global real estate exhibition last year braved up to a decrease in market size, owing to tough macroeconomic conditions in a climate of low oil prices, liquidity challenges and reports of shrinking revenues in the construction industry.
The backlog of work in the United Arab Emirates (UAE) shrunk by around $17 billion in 2016, according to Faithful+Gould’s Construction Intelligence report, published in July.
Cityscape Global’s exhibition director Tom Rhodes last week said that sentiment has shifted for the better, with Dubai’s real estate industry adjusting to lower oil prices and adapting accordingly. But some analysts argued that the market has not recovered, with fewer new project launches expected at the event this year.
“There has been a little bit of talk in the press with press releases from various developers about schemes they’re going to be launching (this year) but I think these aren’t the sort of vast, master-planned communities that we saw at last year’s Cityscape,” Faisal Durrani, head of research at real estate consultancy Cluttons, told Thomson Reuters Projects in a phone interview last week.
“I think one of the biggest ones we saw last year was probably Emaar South, where they announced something like 15,000 units. I don’t think we’re likely to see anything of that scale this year, but, then again we could be surprised.”
Cluttons said in its UAE Property 2017 report released last week that “subdued residential market conditions have curbed developers’ appetite to bring forward new schemes”.
Announcement vs. delivery
According to Cluttons’ estimates, just over 1,600 units have been announced so far this year, against just over 34,000 last year.
“I think we’re seeing less launches this year because conditions remain subdued and I suspect there is a little bit of caution from the developers on the market’s ability to absorb the number of units that are already in the pipeline,” Durrani explained.
Between now and the end of 2020, about 90,000 completions are expected, he said.
Durrani added that it is “very likely” that developers will “sense check themselves” and phase things according to demand over the next three to four years.
“Although we’ve got 90,000 units in the pipeline, it’s unlikely that we’ll see that full amount being completed in the next four years,” he said.
“I would say anything that’s two years away from completing is very likely to complete on time. Anything beyond that, as we’ve seen before, developers do tend to look at re-phasing or a fall in completions, in order not to stifle the market with too much supply.”
Rival consultancy Core Savills' CEO David Godchaux echoed Durrani’s caution on potential completions.
“We have to remember that only 40 percent to 50 percent of what has been announced every year over the past five years has been delivered, has come to the market,” he told Thomson Reuters Projects in a phone interview last week.
But that’s not necessarily a bad thing, he added.
“Without this adjustment possibility, we could potentially have an oversupply problem,” Godchaux said. “Developers have been very smart in adjusting the delivery and phasing out what is required based on the absorption and that’s specific of Dubai, which makes me relatively confident about them continuing to do that as required.”
However, the market sentiment could potentially impact developers’ decisions to launch new schemes.
“Less strong sentiment means developers will also probably want to adjust to that and maybe start bringing [forward] less projects... it remains to be seen,” Godchaux said.
In its annual Residential Sentiment Survey released last week, Core Savills noted that the overall market sentiment was “slightly down” from 2016, due to higher uncertainty from respondents.
Only 34 percent of respondents said they believed that Dubai’s real estate has displayed signs of recovery, while the 2016 annual survey showed a more convincing 50 percent.
Eight out of 10 of this year’s respondents who disagree on visible recovery believe that Dubai’s residential market is expected to be oversupplied by 2020.
“Developers are being smart not to feed this feeling of oversupply in the market sentiment,” Godchaux said, adding, however, that he did not see the market as oversupplied, demonstrating a discrepancy between perceived sentiment and market reality.
Market recovery
Godchaux also attributed the relatively lower levels of sentiment not to pessimism, but a shift from optimism to uncertainty.
“Expectations were very high and a lot of market players are still in the mindset that Dubai should be seeing double-digit growth like it used to see when it was an early emerging market,” he explained.
“But it’s not an early emerging market any more. It has established itself over the past 10 years... and we cannot expect to see the market growing by the same rate or at the same pace of what we have seen in the past.
“But because a lot of people were expecting the market to recover last year, and it has not recovered as fast and as widely as a lot of players were expecting, they are now in confusion mode.”
However, Lewis Allsopp, CEO of Allsopp & Allsopp, disagrees with both of his counterparts, insisting that the off-plan market, in general, has performed “exceptionally well this year”.
“The market sentiment is good,” he told Thomson Reuters Projects in an email interview last week.
“It (the sentiment) will make a difference, as a lot of developers have held off launching projects and developments. They have also held back prime and premium units in other developments, again to release them at Cityscape. We expect a lot of interest, as our investors have been waiting to see what is announced and what is released in to the market at Cityscape.”
Onsite sales to create a different vibe
Cityscape’s Rhodes said he expected the decision to allow onsite sales at this year’s show to have a positive impact.
He added that approximately 30 percent of last year’s attendees were homebuyers and investors, while 68 percent of visitors confirmed they intended to make a purchase or conduct business with a company that they met during the exhibition.
Cluttons Durrani said the fact that organisers can once again offer sales at the event should “change the look and feel of Cityscape, and probably inject vibrancy into it that we may have been missing for the past few years because of the general quiet conditions in the market, which is so sentiment driven”.
Godchaux added that he expects some attractive discounts to lure buyers into purchasing on site, but cautioned that it was essential for end-users to do their homework.
“I would say that no buyer should ever buy anything in the heat of the moment when they have no prior knowledge of the market or what else is out there,” Allsopp added.
“I would go as far as to say it's quite reckless to do so.”
The 16th edition of Cityscape Dubai takes place on September 11 - 13 at the Dubai World Trade Centre.
For more data, analytics, tools and news on projects in the Middle East visit the Thomson Reuters Projects portal
© Zawya 2017
