An Austrian developer is to become the first to build on the famous come infamous Dubai World Islands — an archipelago of islands loosely matched to a map of the world; loosely in that the islands are in roughly the same place as the corresponding country on the map, but the islands are not shaped like the nations or cities they represent.
Developer Josef Kleindienst bought six of the islands in 2006, but delayed plans because of the market slump. The fact that he is building now, how he is building now and the success stories he is telling reporters could all become known as significant in a turnaround-of-fortunes for the luxury property sector in Dubai.
It is significant that the firm has reduced investments in countries like South Africa to start building in Dubai. Looking at reports of both property markets South Africa appears to have the most near-term potential, but apparently Kleindienst Group research disagrees, or at least sees more potential in Dubai than most of us do right now.
And, according to statements from Josef Kleindienst, CEO of the family-owned firm, their opening sales have vindicated this decision.
Kleindienst is building The Heart of Europe, including a replica European City, complete with solar-powered climate controlled raining street, a Beach Bar on Monte Carlo, and villas and a hotel on St Petersburg, Germany and Austria.
According to Kleidienst, 12 of the villas on Germany have been sold for between $1.9 million and $5.5 million each. Selling off plan properties in Dubai is incredibly difficult at the moment, but Kleidienst believes the uniqueness of the development will win the day.
“Dubai needs holiday homes,” Kleindienst, chief executive officer of family-owned Kleindienst Group, said in an interview on the island representing Germany. “If you look at the state of the Dubai market right now, I don’t see demand for properties besides holiday homes for many years.”
Kleidienst also said that While Nakheel “did everything they had to do contractually,” the company hasn’t gone ahead with plans to build infrastructure such as transport hubs that would have helped owners of individual islands move forward with construction, Kleindienst said.
In an emailed response to the press Nakheel said:
“All the necessary facilities remain part of the overall plan for The World development and will be available in accordance with the requirements of the development.”
Dubai developer AA Properties, owner of Taiwan is planning to construct villas and houses there later this year, according to statements from the company.
Kleidienst believes that his development, if successful will spur others to start developing on the islands.
“They are watching us to see if we are able to earn money out there,” he said. “The moment they see that we are successful, they will follow.”
Analysts are mixed in their predictions of that success:
Deutsche Bank AG analyst Nabil Ahmed agrees that the uniqueness of the project could be a differentiating factor in its having success while other developments in Dubai falter, he said:
“Occupancy rates in Dubai hotels are pretty low right now and there are a lot of vacancies,” said. “But if you are a billionaire and you want to rent a top-end, very large luxury villa on your own island for a couple of weeks, I don’t believe there is that kind of product in the market.”
Meanwhile Dubai based analyst Martin Kohlhase believes the development will not do any better than those around it:
“The World is probably closely correlated with what happens in consumer sentiment and the real estate market in the Emirates. Given that we don’t expect a revival for the next 12 to 18 months, I think it’s unlikely there will be a revival of The World project,” he said.
One thing is certain, the world will be watching the world very closely, and success for Kleindienst could lead to success for the world.