x Abu Dhabi, UAESaturday 22 July 2017

Postcards from a property slump

What was once a dramatically changing skyline has ground to a halt as many developments are on hold awaiting financial recovery.

DUBAI // As an amateur photographer and property investor, Imre Solt found himself visiting construction sites throughout Dubai to document the progress of the rising skyline of Dubai on a daily basis. Now he is lucky to find a significant change at a project once a month. "Sometimes I don't take any photos at all because there is no progress," says the Hungarian-born Mr Solt, who has captured the city's growth in what he estimates are 100,000 pictures taken from the tops of tall buildings, helicopters and even a biplane. "There are a few buildings that have made very good progress, but I think more projects are on hold than before. Sometimes, there are just a few workers there."

The numbers bear him out. More than a fifth of construction projects in Dubai have been put on hold or cancelled in the past year, with the remainder severely delayed, said Proleads, a construction information provider. Proleads also estimates that the number of construction workers in Dubai has declined 45 per cent from the peak of the property boom in 2008 to last month, a further sign of the city's post-boom state.

The problems are not isolated to Dubai, with projects in Abu Dhabi, Ras al Khaimah and Ajman similarly stalled. "You have this stalemate," says Andrew Charlesworth, the head of capital markets at the property consultancy Jones Lang LaSalle. "We are not seeing any distressed sales come through. Banks are reluctant to foreclose. Buyers can't make payments and developers can't build." A prime example of the problems is Pier 8, a debris-strewn 16-storey concrete skeleton in the middle of the bustling Dubai Marina. A piece of twisted wire clamps together the site's red-and-white gates. They have been closed since last March.

"The construction has slowed down because of the crisis, but we will be continuing the development of Pier 8 by the end of the first quarter or the second quarter," says a spokesman for Abyaar Real Estate Development, the Kuwaiti developer of the project. "We already have an agreement with one of the local banks in Kuwait regarding financing the remaining floors." It would be easy to simplify the plight of Dubai's developers as the natural aftermath of a boom. Property prices are estimated to have declined by as much as 50 per cent since reaching peaks in 2008, a period when quick resales of apartments and even whole buildings provided a lucrative business for speculators. Now, it would appear, they are paying the price.

The reality, of course, is more complicated. The number of projects that are stalled is dwarfed by the hundreds of projects that are going forward, albeit at a much slower pace in many cases. Many more were completed before the market went awry. Other sites are bustling. A 10-minute walk from Pier 8, the twisting Infinity Tower by Cayan Investment and Development is rising rapidly. In a sign of accelerated construction plans, contractors are putting up the glass on lower floors, while workers pour concrete for new floors above.

In Dubai Marina, 18 projects are either delayed or on hold, according to an analysis by The National. Only five of those projects are more than three storeys high. The vast majority are either sandlots or foundations for buildings. In contrast, 36 projects in the Marina are actively under construction. While the Marina may not show how Dubai developers are coping elsewhere with the downturn, it reveals the outlines of what industry analysts say is a clear trend: developers are working hard to complete projects that are well underway, but waiting until economic conditions improve to finish those that have not started.

In that sense, Abyaar's Pier 8 tower, its rusty steel reinforcement bars covered by a green mesh for preservation, is an exception. The company's project across the street is probably a better sign of the trend. The Ice Tower, a planned 30-floor tower that was launched in 2008, is "on hold for sure", the Abyaar spokesman says. That project's site is nothing more than a fenced-off patch of sand. "Everyone knows we have delayed," the spokesman says. "The projects have been delayed because of the financing situation. To convince a bank to offer you money for something in Dubai, it's not very easy."

As the statistics show, there are many projects in Dubai that also are in limbo, such as Pier 8 or The Pad, a Zaha Hadid-designed apartment tower at Business Bay that the developer, Omniyat Properties, describes as being in the shape of an iPod. The Pad is a few floors high, but Omniyat has put it on hold. Omniyat's problem has been the knock-on effect of Dubai's debt crisis. Dubai is estimated to owe more than US$80 billion (Dh293.84bn) to local and international creditors, much of which it used to build the roads, bridges, power lines and other infrastructure to service projects such as Omniyat's. With credit markets still largely closed and construction delayed, however, stalled roads and services are forcing a rethink for some developers.

"The new completion dates will be dependent upon and consistent with the master developer's permanent infrastructure delivery dates," the Omniyat spokeswoman says. Business Bay's master developer is Dubai Properties, an arm of the Dubai Government-owned group, Dubai Holding. Haroon Mahmood, the chief executive of MiNC Property Enterprises, said that his company's 16-floor, serviced apartment building, Marina Suites, had been marooned on a concrete island.

"We were under construction and one day the contractors arrived at work to find there was no road there," says Mr Mahmood, whose company bought the project from Sheffield Real Estate and sold it to investors. "We had no forewarning and when we talked to them they said come back in two-and-a-half years' time." The site is now accessible, but the delay has eaten through most of the money invested in the project and the original contractor is suing for damages. Still, Mr Mahmood says he expects the complex to be built. Despite all the delays, he says the developer and investors could still make a profit on it.

"I think it will have to go forward at some point, because there's so much riding on it," he says. "I can't imagine everyone walking away from something they've invested so much money and time in." Dubai's project delays might have taken their greatest toll on investors and home buyers, rather than developers. A chorus of disgruntled investors has made waves in recent months, complaining about delays and attempts by developers to press them for more cash to get projects back on track. Back in the Marina, there are several brewing disputes, including at projects located just steps from Pier 8.

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