Emaar Properties’s signature Downtown Burj Dubai development has seen a fall of over 20 percent in property values. Some of the properties within the Burj Dubai tower have now reduced by up to 50 percent.
This goes in line with our report earlier this month on Dubai’s property prices falling. Many developers are now forced to sell their overflow cheaper than they’d hoped for in order to save them from certain bankruptcy. It also seems that high end developments are affected more so in Dubai than the middle and lower market.
Having seen price hikes up to 88 percent by September 2008 this comes as a hard hit for many investors and developers sitting on empty real estate. But by looking at history it is clear that what goes up will eventually come down again – especially when times are tough like they are right now.
With the property price fall at the Burj tower, the tallest building in the world, owners might not make the projected profits usually associated with new developments.
Outside the tower, prices have fallen from the previous Dh3,500 (US$952) per square foot to Dh2,700 (US$735).
Apartments on the 8 Boulevard Walk have seen drops from Dh3,300 per sq ft to Dh2,500 per sq ft within three weeks which results in a 24 per cent decrease. Other areas in Dubai such as the Old Town quarter have also seen price losses along similar lines.
What was once advertised as the hottest piece of real estate in Dubai (Burj) is now the centre of attention for owners who are clearly distressed over the current market developments. Many are forced to sell fast as they struggle to keep up with looming payments. Thinking about a profit at this stage is the least of their worries.
Emaar’s flagship project, Downtown Burj Dubai is a mixed-use urban development that will be one of the most expensive residential areas in the world once completed. And while the development is impressive, at this stage it will take a while longer to become profitable for investors. Being a buyers market now, only the cash flow strong can keep playing the game.
Mergers provide hope for investors
Despite all the gloom and doom, some companies are to take positive action to help the flagging market and provide investors with more potentials to get much needed finances.
Amlak Finance and Tamweel, two companies with roughly Dh25 billion (US$6.8bn) in assets between them, intended to merge into one to become part of Real Estate Bank which is a relatively unknown entity with offices in Abu Dhabi and Dubai. Real Estate Bank is wholly owned by the Ministry of Finance and Industry.
While the idea to provide cornerstone finance to the mortgage market is great, critics say it won’t work.
One senior international Dubai-based banker said it was still not clear whether the two institutions’ main problems had been addressed. “In theory, it is a good idea. But how do you turn two institutions that are in a mess into one combined entity that works well? You just end up with one giant mess.
Both Amlak and Tamweel need to merge with a major bank because what they lack is funds, and banks have that from their depositors. However, hardly anybody had heard of the Real Estate Bank until now. Is it well capitalised? Nobody seems to know.” excerpt of The National
However, the merger has taken place now and to further strengthen the deal between Tamweel, Amlak and the Real Estate Bank, a fourth entity has now stepped into the mix, the Industrial Bank which is owned by the Federal Government and several national banks that have minority stakes.
Together the new merger team will be operating under the name Emirates Development Bank.
It is certainly a step in the right direction to help boost available finances to mortgage seekers.
Photo credits: Flickr