Dubai's property sector has bottomed out and will spend much of the next two years on the rise, says the chairman of the emirate's biggest developer.
Mohamed Alabbar, the chairman of Emaar Properties, said yesterday Dubai was oversupplied but the situation may correct itself within 20 months, a projection analysts called optimistic given an estimated supply overhang of 80,000 units in the next two years.
"In terms of equilibrium between supply and demand, I feel that's probably optimistic," said Richard Paul, the head of residential valuations at Cluttons, a property consultancy.
Yet lower prices in Dubai, Mr Alabbar said, had reduced the cost of doing business in the emirate and helped it stay competitive. The oversupply "is going to be a great advantage for the city", he told a conference in Dubai.
It could take three to four years before Dubai's embattled property market begins to see "equilibrium" between supply and demand, Mr Paul said. Property prices in parts of Dubai have fallen by about half since the peak in 2008.
"People aren't going to come overnight" and fill all Dubai's vacant property, he said. "It only happens by new companies coming into Dubai and bringing new workforces."
With more projects coming to the market, there will be more than 80,000 excess units available during the next two years, according to Landmark Advisory. That figure is compounded by an existing supply of apartments and office space completed last year and this year.
"Our projections indicate that approximately 70 per cent of the new supply delivered in 2011 can be absorbed," said Jesse Downs, the director of research and advisory at Landmark.
"However, the problem is the accumulated supply overhang from 2009 and 2010."
Despite his sunny outlook, Mr Alabbar said the crisis had presented him and his company with a "pretty big bump" to overcome. "Everybody got hit," he said, but "I think everything is back, aside from the real estate side".
One of Emaar's problems, he said, was that it had been too dependent on Dubai and had not expanded quickly enough into fast-developing markets such as India. Emaar hopes to generate 50 per cent of its business outside Dubai in the next few years; Dubai currently accounts for 80 per cent of its business, according to published reports.
Despite these issues and the turmoil caused by the crisis, Mr Alabbar said Emaar was ready to launch its next stage of growth, financed through debt and possibly by selling shares in some of its subsidiaries to the public. But the Investment Corporation of Dubai, a government investment arm that owns about a third of Emaar, is not planning to sell its stake as part of a privatisation drive revealed on Sunday.
"Our decision has nothing to do with the government privatisation drive because that's really their business but I think for anyone to grow you will either increase your capital or take some of your entities and take them to the public market," Mr Alabbar said.
"You will increase your debt. So I think the future is about a combination of all. If something interesting comes, we'll probably take it and see which one of these will work better for us to grow in the future. If we're saying the worst is over, then we have to shift gears and start looking 20 miles ahead."
kbrass@thenational.ae
