Dubai ‘Not Worried’ About Maturing Debt, Ruler Says

Sept. 9 (Bloomberg) -- Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum said he is “not worried” about the emirate’s ability to repay at least $4.52 billion of debt this year, boosting property developer Nakheel’s bonds to a year-high.

“I assure you we are alright, the U.A.E. is alright, and we are not worried,” Sheikh Mohammed told reporters late yesterday at his Zabeel palace in Dubai, when asked whether the emirate would be able to repay the loans. Sheikh Mohammed is also the prime minister of the United Arab Emirates, a union of seven states of which Dubai is the second-biggest after Abu Dhabi.

The Dubai government must repay a $1 billion Islamic bond maturing in November, while state-owned real-estate developer Nakheel PJSC has a $3.52 billion Islamic bond falling due in December. The emirate borrowed $80 billion to finance its transformation into an international logistics, tourism and finance hub, and the seizure of global credit markets sparked concern about its ability to repay the loans.

Nakheel’s 3.1725 percent bond surged 9.3 percent to 102.5 cents on a dollar at 12:34 p.m. in Dubai after the comments, according to prices provided by National Bank of Abu Dhabi PJSC to Bloomberg. The bond, which slumped to 63.5 cents on a dollar in February, is headed for its highest close since Sept. 2008.

Moving markets

“This is moving markets,” Abdul Kadir Hussain, chief executive officer of Mashreq Capital DIFC Ltd., said in a phone interview from Dubai today. “It gives a boost to confidence that the market was looking for, and this is obviously coming directly from the source, so that provides a lot of comfort.”

Dubai set up a $20 billion fund earlier this year to help state-related companies struggling to raise money amid the credit crisis. Home prices in Dubai have tumbled by about 50 percent from their peak and may drop another 20 percent this year, Deutsche Bank AG said in a report in June.

Dubai established the fund after the global financial turmoil hurt its key property, finance and tourism industries and hindered companies’ access to credit. The first $10 billion for the fund was raised by selling bonds to the U.A.E.’s Abu Dhabi-based central bank in February.

The emirate, which is building the world’s tallest tower and the biggest man-made islands in the shape of palm trees, would study the viability of projects more closely in the future after the credit crunch led to an economic slump in the Persian Gulf business hub, Sheikh Mohammed said.

More careful

“We’ll be more careful now,” he said. “The crisis came for everyone, not just Dubai. People had to fight.”

The sheikhdom shelved some of its most ambitious plans including a set of dancing towers, made up of 80 stories of rotating floors, and a Formula One theme park. Emaar Properties, the U.A.E.’s biggest developer, is in talks to merge with three developers owned by state-controlled Dubai Holding LLC.

“The strategy is nearly the same,” Sheikh Mohammed said. “The U.A.E. is strong, it is like a plane facing headwinds. Now the headwinds are slowing down, so the plane will reach its destination more quickly.”

 

Source: Bloomberg

RAK seizes $800 mln failed realty project

The Ras Al Khaimah government said on Wednesday it has seized control of Khoie Properties, the failed developer behind an $800 million real estate project in the UAE emirate.Rakeen, owned by the emirate's sovereign wealth fund Ras Al Khaimah Investment Authority (RAKIA), has taken over legal custodianship of Khoie and the La Hoya Bay project following a court order, RAKIA said.Khoie has become insolvent after defaulting on land payments and failing to deliver properties to buyers.Some 800 investors, half of them from the UK, have bought properties in La Hoya Bay, a Mediterranean-inspired waterfront residential and leisure complex launched before the UAE property market collapse."The RAK court's decision to appoint Rakeen as custodian of Khoie Properties is a significant step that promotes and protects the welfare of investors and property buyers in Ras Al Khaimah,” RAKIA CEO Khater Massaad said in a statement.“With so much at stake, we believe that keeping this project on track will further consolidate the reputation of Ras Al Khaimah and highlight the local government's proactive support to all investors."Projects worth billions of dollars in planned properties were launched across the UAE with different emirates trying to replicate Dubai’s real estate boom, but developers have seen their fortunes turning upside down in the global financial crisis.

Source: MB

Residential and office rents continue falling in Dubai

Residential property rents in Dubai are continuing to plummet, according to the latest real estate report to be published but there are signs of some stabilisation.
Commerical rents are also falling and are set to tumble further as new office space comes onto the market in the next 18 months, another report warns.
Rents in the Dubai residential property sector fell up to 30% in August, the report from Landmark Advisory reveals. Worst hit were two bedroom apartments in Palm Jumeirah and in International City where rents fell 23%. Other key developments such as Discovery Gardens, JLT and JBR have now seen rents fall by between 10 to 30% since March.
The report says that although rents in many areas of Dubai have decreased significantly over the past five months there are exceptions to this trend with some unit types in preferred developments performing well.
For example, good quality one bedroom apartments in Dubai Marina have increased by 11% while two bedroom apartments have gone up by 6%. Also three and four bedroom villas on Palm Jumeirah have returned to March 2009 rents or increased marginally, Landmark's analysis shows.
Charles Neil, CEO of Landmark Advisory said those developments with rising rents are benefitting from a lack of supply. ,Many landlords have removed inventory from the market to avoid renting out at current market rates while others may be out of town during the summer period and consequently unavailable,' he explained.
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He also said that demand for property was particularly strong during June and July due to a significant amount of rental contracts ending around this time. But overall these marginal rent increases are unsustainable.
Landmark predicted that most residential areas in Dubai will be subject to further fluctuation, especially as new supply comes onto the market in the next 12 to 24 months.
Meanwhile average commercial rents are set to tumble further with some 25 million square feet of additional office space forecast to enter the market by the end of 2011, according to Jones Lang LaSalle.
The property advisor said office rents across Dubai fell by 25% in the second quarter, but the decline is falling compared to the 45% fall in the first quarter. Rents for Grade A space, excluding DIFC, now average at AED225 per square foot, in line with levels seen in mid 2007. This now made prime Dubai offices cheaper than those in London, Paris, Hong Kong, Mumbai and Moscow, the firm said.

Source: Property Wire

Dubai property asking and achieved sale prices converge

A report on Dubai's troubled residential sector has suggested that the market is experiencing the first green shoots of recovery, with real estate beginning to stabilise, following a devastating period for the market.

The Dubai residential real estate market is showing signs of renewed confidence as transactional value remained stable between Q1 2009 and Q2 2009 according to US-based property consultant Jones Lang LaSalle's Mena's Q2 2009 Dubai Residential Market Snapshot. While average asking prices have continued to fall - by around 24% in Q2 from 30% to 50% in the first quarter - the rate of decline in achieved prices has been lower at just -6%, resulting in a convergence between asking and achieved prices. This has been complemented by a lower rate of rental decline than in previous months, with the average rent for two bedroom apartments falling by 15% in Q2, compared with a 22% decline in Q1 2009, according to the report.
Signs of stabilisationIt is estimated that 22,400 residential units are expected to be handed over in 2009, in spite of over $24bn worth of residential projects being put on hold or cancelled. Demand remained stable with little change between Q1 2009 and Q2 2009, compared to the 58% annual decrease between Q2 2008 and Q2 2009. Craig Plumb, head of research at Jones Lang LaSalle Mena added: 'The stabilisation of transactional volumes is an important indicator, which reflects improved confidence among investors. The narrowing gap between asking prices and achieved prices is a further indication that the market is beginning to stabilise, albeit at significantly lower levels of pricing than those seen earlier in the year. 'While there have been a large number of projects delayed or cancelled, there remains a significant level of new supply, with around 22,400 residential units expected to be completed across Dubai in 2009.' The report's findings come on the heels of a report by the Dubai-based Landmark Advisory which revealed less flattering figures for the rental market. In its report published earlier this month, it revealed the average rents for villas has dropped by 42% from the peak of Q3 2008 to the second quarter 2009. In just the second quarter of 2009, average rents in Dubai declined by 23% to Dhs129,900 while average villa rents fell by 19% to Dhs220,350.
Developer slowdownDubai's construction sector has been among the worst affected by the global slowdown, with a sizeable number of high-profile projects being cancelled or delayed as finance streams dry up. Developer Emaar Properties announced that it had made a loss of Dhs1.3bn ($530m) during the second quarter of this year. Most of the losses came from the developer's decision to write down Dhs1.7bn of losses made by its US-subsidiary John Laing Homes. In June, Emaar announced it was in talks with Dubai Holding to merge the two real estate businesses: Emaar, Dubai Properties, Sama Dubai and Tatweer. Mohammed al-Gergawi, chairman of Dubai Holdings said: 'Consolidating these three companies with Emaar is a natural progression in the evolution of the Dubai real estate landscape, providing benefits to all stakeholders...The combined entity has a clear and concise strategy, better positioning Dubai as a world leading hub in real estate development and management.' A tentative timeline has estimated a completion of the merger by October 2009, following legal and financial due diligence, and approval by regulatory authorities and Emaar shareholders. In January, the SR2bn ($534m) Dubai Towers Jeddah project was put on hold as the developer, Sama Dubai reined in its development plans, which included the Jumeirah Hills development, which is planned for the site of the existing police academy next to interchange 4 on Sheikh Zayed Road. The status of another scheme, Falcon Island - which involves building a man-made island near the Burj al-Arab hotel - remains unclear.

Source: AME

Dubai, Abu Dhabi indices retreat

Emaar Properties headed early losers on Dubai's index, as investors cashed in gains from a four-session rally, but Shuaa Capital extended gains.
Emaar dropped 1.1 per cent, having hit a nine-week closing high the previous day, while rival developer Union Properties lost 2.1 per cent.
Shuaa bucked the negative trend, rising 4.1 per cent to take its gains to 19.2 per cent since Saturday. It appointed a new chief executive on Sunday and said on Saturday it would issue 515 million shares to Dubai Banking Group (DBG) to resolve a long-running bond row.
The index fell 0.5 per cent to 1,913 points.
"Ramadan trading has been slightly different this year and there has been some accumulation to help the index slowly pick up -- after Ramadan there might be a decent rally," says Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.
Meanwhile, property stocks also weighed on a retreating Abu Dhabi index, as declines in Asian stocks convinced UAE investors to sell.
RAK Properties and Aldar Properties were the two most active stocks and they fell 1.3 and 0.8 per cent respectively.
Aldar has risen 19.7 per cent this month as investors bet the UAE property sector was stabilising and that beaten down real estate stocks were undervalued.
Sorouh Real Estate was another to decline, dropping 1.6 per cent. The index fell 0.4 per cent to 2,871 points.
Analysts said UAE markets continued to maintain a high correlation to their global counterparts. Chinese stocks plunged 6 per cent to a three-month low on Monday.

Source: Business 24/7

Recession forces Dubai rents to return to earth

Falling rents have knocked the Dubai office market out of its solar orbit and more into line with normal cities like Hong Kong and Moscow, according to a report.
Property firm Jones Lang LaSalle’s report, “Q2 2009 Dubai Office Market Snapshot”, says office rents across Dubai fell 25% in the second quarter of this year (Q209). That is a slower decline than the 45% drop seen in Q109, but with office rents for Grade-A space (excluding the Dubai International Financial Centre, or DIFC) now averaging AED225 per sq ft, rents are roughly back where they were in mid-2007 and the city-state is now comparable to places like London, Paris, Hong Kong, Mumbai and Moscow, says Jones Lang Lasalle.
The report said office rents will likely fall further because plenty more space is due to come on stream – as much as 25 million extra square feet by the end of 2011. In Q209 alone the vacancy rate rose to around 25% as more than 2 million square feet of extra space entered the market amid subdued demand.
Jones Lang Lasalle says the global economic downturn has seen many tenants downsize or delay expansion plans. Matthew Hammond, Head of Agency at Jones Lang LaSalle MENA added: “The market has swung in favour of tenants over the past six months and there are some very attractive deals available in a range of newly completed buildings across Dubai. This has created a situation where tenants can take advantage of tomorrow’s prices today and negotiate rents below current asking levels.”
In the residential market, another report recorded similar trends. In its Q209 report, property research firm Landmark Advisory said that average sale prices for villas in Dubai fell 24%, while apartment prices fell 17%. However, demand was considerably stronger for villas, which accounted for 73% of all residential sales.
Average apartment rents in Dubai fell 23% to AED 129,900, and average villa rents declined 19% to AED 220,350. Since peaking in Q308, villa rents have fallen 31%, while apartment rents are down 29% since their peak in Q408.
However in August Landmark Advisory said it observed an unexpected, though small, upsurge in rents across Dubai, and a noticeable fall in leasing inventories and listing volumes. It said landlords appear to be de-listing or forgoing listing their properties either because they’re not happy with rent levels or because they’re on summer vacation.
Either way, the company said, landlords are only “delaying the inevitable” in trying to dodge the falling market.
“Assuming that landlords are exiting the market due to lower rents, this behavior will prevent Dubai’s leasing market from reaching a rent floor,” the report said. “In an oversupplied market like Dubai, rent floors are consumer driven. The momentary respite in the rent correction process, caused by a supply distortion, is only temporary and will reverse as soon as those properties come back onto the market. Real rents will be determined by what Dubai residents are willing to pay.”
The report said the downward trend will continue because of a systemic imbalance in which demand is restricted by high borrowing costs and credit scarcity, while continued building is incentivised by lower capital costs on construction loans.

Source: ICR

Dubai faces more than 30,600 vacant homes by end '09

Dubai is expected to have 30,600 empty homes by the end of year as more buildings are completed and the population shrinks, a new report shows, adding to concerns about a recovery in the emirate's troubled property sector.
Abu Dhabi faces a shortage of 28,000 residential units, UAE daily Emirates Business reported on Thursday, citing a JP Morgan report.
The report said that beyond 2009, the forecast of 3.5 percent population growth for Dubai is unlikely to absorb the upcoming supply of residential units.
While Dubai has been harder hit in the economic downturn, oil-rich Abu Dhabi is using its vast wealth to press ahead with infrastructure projects, albeit at a slower pace.
“In the short term, we expect the non-residential sector in the UAE to remain under pressure given the global financial crisis. However, the historical shortage of both retail and commercial space in Abu Dhabi has kept falls in leasing rates well below Dubai," the investment bank noted.
Rents in Dubai have fallen by more than half in some areas since their 2008 peaks, but areas closer to the Abu Dhabi border have seen occupancy levels rise as renters from the UAE capital move there to take advantage of lower rents.

Source: MB

Nakheel presses buyers for cash

Nakheel is asking investors using credit transfers for property purchases to top up their payments with cash, as it seeks to raise funds ahead of a mid-December due date for a Dh3.5 billion (US$953 million) bond.According to brokers, the Dubai Government-controlled developer allows investors in delayed projects to sell their downpayments to other investors who have already invested in other Nakheel developments.
But now the company is no longer allowing customers to use credit transfers alone to fund instalments, and is demanding that part of the payments are made in cash, brokers say.“For example, when a buyer has Dh1m to pay, Nakheel would say you need to pay 30 per cent in cash, which makes Dh300,000,” said one broker, Farid Ahmad Hussein. “They will accept a credit transfer of Dh700,000 from somebody else. The investor can get this Dh700,000 maybe at 40 per cent discount now in the market from another investor. In total he has saved Dh280,000.”
Nakheel needs to pay back a Dh3.5bn bond on December 14, in what is being seen by international lenders and rating agencies as a litmus test of the Dubai Government’s willingness to support its affiliated companies facing financial difficulties.So called “credit consolidations” were triggered by the collapse in property prices last autumn, which saw scores of developments either cancelled or delayed and effectively ended the “off-plan” property market.

Investors in stalled projects have been able to sell their downpayments, usually at a loss, to other customers of the same developer, and then those downpayments can be used on continuing projects. These credits can only be transferred between buyers that have already made downpayments and are not available on the secondary market.Developers facilitate the transfer of credit between investors in different projects to generate funds needed to complete some developments, while also making it easier for them to abandon others. External brokers help to match buyers.
Unlike other developers, Nakheel requires the transfer of ownership between investors to be completed before credit is moved between properties.“Investors in projects that have been deferred have the option of consolidation if they own other properties within the Nakheel portfolio. The advantage to the investor is that Nakheel is able to hand over property to the owner sooner than it might on a deferred project and help investors reduce their financial exposure,” Nakheel said in a statement. The developer declined to comment on whether cash payments were also required to complete property consolidations.
Nakheel has shortened the time it takes to complete such transactions to about a month, from three or four months previously, according to brokers.Nakheel, the developer of The Palm Dubai, has spent billions of dirhams on projects that are still under construction, while adding further offshore island developments including The World and The Universe.But development on such a massive scale has come at a high price for the company, which is now struggling to repay debts accumulated during the six-year building boom.
The trade in credit notes on stalled projects is helping revive activity in the property sector, according to Rajesh Sony, a director of Bluechip Real Estate. The firm, he said, generates 90 per cent of its turnover from matching buyers and sellers of credits.“This is a win-win situation between the developer and investors. If all the investors of one project transfer the money elsewhere, the developer may call off the project without having to refund the money to investors. At the same time, investors can get out of the market without losing all the money, and other investors in ongoing projects can pay their instalments at a cheaper rate,” he said.
The exchange of Nakheel credit, or consolidations, began in February on projects that include the Dh4.4bn Dubai Promenade, and the Dh2.9bn Trump Tower, the centrepiece of Dubai’s original Palm Island development, according to Mohammad Mujtaba Vakil, a broker from Linkage Real Estate.He said that while cash components were not requested on earlier transfers, Nakheel now “would not accept anything less than 30 per cent”.

Source: The National

Nakheel cuts customers a deal

Billed as a development twice the size of Hong Kong Island, the billboard announcing Dubai's mammoth Waterfront project now sags from its frame beside the Sheikh Zayed highway.
Waterfront and its parent company Nakheel are among the most high-profile victims of Dubai's property crash. Local and international investors, bankers and real estate agents have been fretting how Nakheel, the property developer, will meet a series of loan payments due this year and next.
But now a mechanism has taken root allowing the Dubai government-owned company to unwind contracts in certain developments, such as Waterfront, that are unlikely to see the light of day.
A growing secondary market allows investors in deferred or cancelled projects to recoup half of their investments by selling their down payments at a discount to other Nakheel customers. These customers can then plough the full value of these "credit notes", as they are being called, into properties that are expected to be built.
In return for the substantial discount, beneficiaries have to inject cash of about 30 per cent of their next instalment into the developments. Investors in off-plan properties normally pay in fixed instalments. So, from Nakheel's point of view, the consolidation process is bringing in cash in a slow market.
Nakheel, backed by its parent Dubai World, needs to raise $4bn to settle a $3.5bn Islamic bond or sukuk , plus profits, due in December, as well as invoices from contractors and suppliers. Its cash flow challenges do not end with the bond: the company has another $4.4bn of debt maturing through 2012, according to its 2008 financial statements.
Brokers and executives say Dubai Waterfront and Palm Jebel Ali, an offshore island, are the main projects where Nakheel will allow consolidation deals.
Thousands of these devices - Nakheel declines to use the term "credit note" - have been issued since April, as the developer seeks to shrink its $80bn project portfolio and to cut expenditure.
Last year Hossam, who asked that his full name not be used, put down Dh1m ($272,000) on a villa in the Veneto project, which was billed as the most up-market part of the Waterfront. Two months ago Hossam managed to sell his investment on to another investor - but only at a 50 per cent discount.
"I am angry that I lose money, but what am I going to do? Sue the government?" he asks. "At least the notes have created some liquidity, the larger problem lies with the private developers."
Hossam is more troubled by the millions of dirhams he ploughed into a private developer that has gone bust during the recession, leaving his family living hand-to-mouth.
The consolidation deals are helping lubricate the clogged property market in Dubai, where transaction volumes have declined as prices halved since the peak last year.
"It's been a very busy market," says one broker, who declined to be named. Other Dubai real estate developers are also offering similar devices to customers, he says.
Nakheel confirms that it is processing requests to consolidate properties but would not say how many it has approved.
"Investors in projects that have been deferred have the option of consolidation if they own other properties within the Nakheel portfolio," the company said. "The advantage to the investor is that Nakheel is able to hand over property to the owner sooner than it might on a deferred project and help investors reduce their financial exposure."
The consolidation deals show the painful measures the company is taking to secure money.
Last week Nakheel raised more than $170m by selling its stake in Mirvac, an Australian developer. The company's parent, Dubai World, the guarantor of Nakheel's 2009 bond, is looking at other means of raising cash as refinancing looms.
The company this year asked contractors and suppliers to take "haircuts" of about 25-35 per cent on unpaid invoices.
Bankers say Nakheel seems to be losing future profits, but maintain that the reduced cash payments from these consolidation deals cover its current construction costs. "Forget profits, it's all about the balance sheet right now," says one banker.
James, a financial services worker, has opted for the consolidation route and is taking advantage of another investor's financial woes to shave $50,000 off the $800,000 price of an off-plan villa. James has transferred his counterparty's down payment into an instalment on another property, which is due to complete before his original choice.
Before sealing the deal, he climbed over the fence of his new property to check progress. Based on what he saw, he believes the house will be ready next year and so he is willing to take a gamble on the developer meeting its schedule.
"It's good for me, but I feel sorry for the other guy," he says. "The government is not honouring a contract with him."

Source: Finance Times

Dubai commercial property prices 'to continue slide'

DUBAI — Commercial property prices in former boomtown Dubai in the United Arab Emirates are set to slide even further, consultancy firm Jones Lang LaSalle said in a report on Tuesday.
Although the rate of decline in office rental prices slowed in the second quarter from the previous quarter, they are still poised to fall further because of increased market supply, it said.
"The Dubai commercial property market is becoming more competitive on a global scale as falling rents and increased vacancy make the city more attractive to potential tenants," the report said.
Commercial rental prices declined 25 percent in the second quarter this year compared with a 45 percent decline in the first quarter, averaging 225 dirhams (61 dollars) per square foot per year, the firm said.
By the end of 2011, 25 million square feet (2.25 million square metres) of additional office space is also expected to enter the market, it said.
"(This) will increase the vacancy rate and place further downward pressure on average rentals," the Jones Lang LaSalle report added.
Average prime office rentals in Dubai, which saw a six-year economic boom fuelled by skyrocketing oil prices, are now below those in major international office centres of London, Paris, Hong Kong, Mumbai and Moscow, the report said.

Source: AFP

Clock Ticks for Dubai Debt and Nakheel

Dubai is facing off against its bankers. As the government tries to restructure a vital $3.5 billion bond, due in December, for troubled real-estate company Nakheel, bankers seem to have two options.

They can agree to new terms and lend more. Or they can burn bridges with the government and accept that they will struggle to win future business in Dubai and oil-rich neighbor Abu Dhabi. The problem is, giving Dubai more debt is risky for the likes of Barclays, Deutsche Bank and Credit Suisse.

First, it is unclear quite how much Dubai owes altogether. Nakheel recently said in a filing that its government-controlled parent, Dubai World, alone has consolidated liabilities of about $60 billion.

The fear is that Dubai's total debt burden, including government-related entities, might be bigger than the $80 billion figure the government mentioned last year. Given a lack of clarity over definitions, some bankers estimate that the overall figure could be anywhere between that and $160 billion, close to the GDP of the United Arab Emirates, of which Dubai is part.

Lending more to a real-estate company amid a slump also carries risks. Nakheel says it has $80 billion of real-estate projects in development. But with Dubai house prices down 50% in a year and international companies sending fewer workers, Nakheel's revenue is hard to predict.

Even so, investors seem convinced that banks will support Nakheel or that it will get some of the $10 billion Dubai borrowed from the Abu Dhabi-based central bank this year. The Nakheel bond has bounced from 63.5 cents on the dollar to 90 cents. But even if an embarrassing default is avoided, the damage has already been done to the sheikdom's financial reputation.


Source: The Wall Street Journal

Dubai residential rents fall by up to 30% in August

Residential rents in Dubai fell by up to 30 per cent in August, a real estate consultancy said yesterday, while it believed the marginal rent increases in certain pockets of the emirate were "unsustainable". The maximum rental decline was seen in two-bedroom apartments in Palm Jumeirah, which fell 30 per cent in August. Two-bedroom apartments in International City, Jumeirah Lake Towers (JLT) and Jumeirah Beach Residence decreased by 23 per cent, 17 per cent and 16 per cent, respectively. In the one-bedroom category, International City saw the maximum fall of 22 per cent, followed by Palm Jumeirah and JLT, declining 20 per cent and 19 per cent, respectively, Landmark Advisory said in its August 2009 Price Guide.Four and three-bedroom villas in Mirdiff fell 31 per cent and 26 per cent, respectively. The current market rents for a four-bed villa stand at Dh140,000 per annum in August compared to Dh202,500 in March, while for the latter it is Dh155,000 from Dh115,000."Demand for property was particularly strong during June and July due to a significant amount of rental contracts ending around this timeframe. The large amount of rents ending during the same period ultimately creates a temporary supply distortion following a period of particularly strong demand," said Charles Neil, Chief Executive Officer, Landmark Advisory.He added: "The increasing rents can be attributed to a lack of supply – many landlords have removed inventory from the market to avoid renting out at current market rates, while others may be out of town during the summer period and consequently unavailable. We predict the month of Ramadan will also affect the leasing supply as many landlords are waiting until fourth quarter to reassess the market. "Less than half of the 22,400 units have been delivered in Dubai by mid-year, Craig Plumb, Head of Research at Jones Lang LaSalle Mena had told Emirates Business. Earlier, JP Morgan estimated Dubai will have an excess of 31,000 units in 2009.Rents in many areas of Dubai have decreased significantly over the past five months, but despite this, there are "exceptions" to this trend with some unit types in preferred developments performing well. Apartments of good quality in Dubai Marina have increased by 11 per cent for one-bedroom units and by six per cent for two-bedroom units, while three and four-bedroom villas in Arabian Ranches and three-bedroom villas on Palm Jumeirah returned to March 2009 rents or have increased marginally. "Although there is rising rents for one and two-bedroom apartments in Dubai Marina, the rents for studios and larger three and four-bedrooms apartments have declined. These rental trends are, of course, highly correlated with emerging demand patterns. Preferred areas and unit types will be the first to recover in terms of rents. Tracking these specific units over the past five months indicates that rents in these areas are sustainable. "These findings are in line with our third quarter Dubai and Abu Dhabi research report, which showed that one and two-bedroom apartments and three and four-bedroom villas were the most sought after unit types in the leasing market," Neil said. According to Landmark research, relocation demand is continuing to drive the leasing market with demand still coming from Abu Dhabi and Sharjah as well as from within Dubai. A continued upgrading trend is also evident with location, quality and size being the key factors for relocation demand.Most residential areas in Dubai are subject to further fluctuation, especially as new supply comes onto the market in the next 12-24 months, the consultancy said."If rents do come down further for these areas then we expect additional relocation demand as long as landlords adapt pricing strategies. Of course, this relocation demand will help to mitigate any further rental declines," said Neil. According to Jones Lang LaSalle, rents have declined by 15 per cent in Q2 compared to Q1 and "will fall further" in the third quarter.

Source: Business 24/7

Dubai Holding completes property revamp

DUBAI (Reuters) - Dubai Holding, a firm owned by the Gulf Arab emirate's ruler, said on Saturday it had merged the portfolios of its property subsidiaries Dubai Properties, Sama Dubai and Tatweer as part of its restructuring plans.
Last week Dubai Holding said it was reorganizing itself in order to cope with the impact of the economic crisis, condensing seven of its units into four -- property, business parks, hospitality and investments.
The formation of the business parks unit had also been completed, the company said in a statement.
"Existing project plans will remain in place," Dubai Holding said in the statement.
Dubai Properties, Sama Dubai and leisure and theme park developer Tatweer are all in talks to merge with the emirate's leading developer, Emaar Properties.
The business parks unit integrates the existing operations of business park operator Tecom, Dubai Healthcare City and Dubai Industrial City, the statement said.
Moody's in July downgraded the ratings of Dubai Holding Commercial Operations Group to A3 from A2 and placed the ratings on review for possible further downgrade to reflect the continued fundamental challenges" and "financial profiles in the wake of difficult conditions on Dubai's property market."

Source: Reuters

Nakheel sells Mirvac stake for US$171 million

UAE. Nakheel, the Dubai-based property developer, sold its remaining 172 million shares in Mirvac Group, the Australian property developer, for A$206.4 million (US$171 million), reported 'The Australian'.
A block trade of Nakheel's remaining 172 million shares, was carried out by Deutsche Bank, which placed the stock with a range of institutional investors at A$1.20.
The trade was done at a marginal discount to the A$1.25 to A$1.27 range in which it was trading before the placement was carried out, said the report.
Nakheel bought a 6.5% stake in December 2007 and built up its stake in Mirvac to about 12.5% but had been selling down its stake over the last year.
Mirvac chief executive Nicholas Collishaw last night told The Weekend Australian the property group would not, with the exit of its largest investor, lose its firepower in pitching for developments.
"It means for us, from our point of view, business as usual," Mr Collishaw said.
"It has come as a surprise. If there is a range of institutions that have taken over the big line of stock that has gone through, then I think we will end up with a more stable investor base."
State-owned Nakheel is building palm tree-shaped islands off Dubai’s coast and an archipelago called The World that replicates the map of the world off the coast of Dubai.
The developer reported in May that 2008 profits dropped 90% after it took a US$1.3 billion impairment charge due to falling property prices. Net income for 2008 declined to AED495.5 million (US$135 million) from AED4.73 billion a year earlier while revenue advanced 19% to AED16.4 billion.
Nakheel booked an “impairment and termination” charge of AED4.8 billion to ensure asset values reflect “their future recoverable amount,” it said in May, adding that it also delayed or deferred some of its medium and long-term projects.

Dubai World $60B Liabilities Add To Emirate's Debt Woe

DUBAI (Zawya Dow Jones)--Government-owned Dubai World holds almost $60 billion in liabilities on its balance sheet, raising concerns that the sheikdom's debts may be far greater than initially thought, recent figures show.
At the end of last year, the conglomerate had 217.8 billion U.A.E. dirhams ($59.1 billion) in liabilities against AED365.8 billion in assets, according to a statement posted on NASDAQ Dubai's Web site on July 31.
The figures may indicate that the total debt held by Dubai and its government-related entities greatly exceeds the official $80 billion announced last year when the emirate started to come to terms with the global financial crisis.
"The $60 billion is very large and raises concerns and questions," said Fahd Iqbal, an analyst at investment bank EFG-Hermes, adding that it's difficult to judge the impact that the consolidated figures will have on the emirate's total debt position.
The term liability refers to a company's legal debts or obligations arising from its business operations. A detailed breakdown of Dubai World's liabilities wasn't provided in the statement to the bourse by its real estate unit Nakheel. NAKHEEL BOND

Nakheel was forced to reveal details of its mother company as part its obligations on a $3.5 billion sukuk due in December. Whether the bonds are refinanced or paid off, is weighing heavily on the minds of analysts rating Dubai's government-owned companies.
"The fact that the government is not sending a message of unambiguous support for Nakheel raises doubt in the market regarding the extent to which the government will relieve investors of the substantial refinancing risks of Dubai Inc. generally," said Farouk Soussa, an analyst with ratings agency Standard & Poors, which recently downgraded the credit worthiness of a number of Dubai government-controlled companies.
Both Nakheel and Dubai World declined to comment further on the July 31 disclosure when contacted by Zawya Dow Jones.
Nakheel, which has $80 billion of projects underway in Dubai including the iconic palm-tree-shaped archipelagos, has been hit hard by a near 50% drop in property prices in the emirate. It is entangled in a growing number of disputes over unpaid bills to foreign contractors.
In May, Nakheel said it received funds from the $10 billion that Dubai borrowed from the Abu Dhabi-based central bank. The company declined to say how much funding it got, but analysts at the time put the figure at AED2 billion.
Dubai is planning to raise the second $10 billion tranche of the bond later this year and has set up a support fund to distribute money raised from the bond.
SCALING BACK
Government-owned companies in Dubai are under pressure to restructure as the emirate struggles to bolster an economy that's being hit hard by the global financial crisis and rising costs of financing a mounting debt pile.
Dubai World is just one part of the extended business empire of the emirate's ruler Sheikh Mohammed bin Rashid Al Maktoum that encompasses activities including banking, hotels, airlines and property.
The company, whose interests include ports, real estate and leisure, had AED52.3 billion in revenue last year, the regulatory filing shows.
As the global financial downturn continues to impact Dubai World at home, the conglomerate is reviewing its overseas projects.
On Wednesday, Malaysian power producer and port operator MMC Corp. (MMC CORP.BHD) said Dubai World was reconsidering its investment in a 16 billion ringgit ($4.5 billion) planned maritime center.
Earlier this month, it said it was putting on hold some of its billions of dollars worth of planned investments in Africa due to the downturn.

Source: The wall street journal

How Far Up Will Dubai Tower Finally Top Out?

DUBAI -- Amid a slumping real-estate market and canceled or delayed development projects across this city-state, a mystery is swirling over the nearly completed Burj Dubai, already the world's tallest skyscraper: When will it open?

Emaar Properties PJSC, the Middle East's largest home builder by market capitalization, isn't saying.














Emaar Chairman Mohamed Ali Alabbar last year said that September 2009 was a "possible and reasonable" date for completion.
However, this date slipped after the company said it wasn't happy with the interior design and wanted to upgrade it. Local media reports now suggest the United Arab Emirates National Day on Dec. 2 as the new deadline, but Emaar has refused to confirm, saying only that it will open "this year."
A handful of cranes still are working halfway up the tower, which stands at just over 2,625 feet. Emaar won't disclose the tower's final height until completion, although most estimates put it at 2,684 feet, far taller than Taiwan's Taipei 101, which had been the world's tallest skyscraper at 1,670 feet.
Emaar's silence on the issue, and the emirate's financial woes, has intensified the mystery surrounding the $1 billion tower and sparked questions around the city about the readiness of the building. It also has raised concerns among investors who have paid as much as $3.5 million for one-bedroom apartments there.
The Burj Dubai, or Dubai Tower, was intended as a symbol of the city-state's global ambition and engineering capabilities, but the emirate's real-estate and financial landscape has changed since construction of the tower started in September 2004.
Like other places around the world, Dubai has been hit by a property slump as a result of the global credit crunch. Home values have fallen by about half from their peak in the third quarter of last year. As the downturn shows no signs of letting up, many developers are being forced to scale back real-estate projects, shed staff and make other cash-saving moves.

Emaar, which dominated the Dubai building boom since it opened up to foreign investors in 2002, also is facing the impact of falling house prices and sales both at home and overseas. In July, it posted a second-quarter loss of $350 million, compared with a net profit of $571 million a year earlier after it was forced to write off $470 million from its U.S.-based John Laing Homes division. The developer said it is putting expansion plans on hold and is focusing on finishing existing projects to offset the downturn.
The opening of the Burj Dubai, which stands at the heart of Emaar's $20 billion flagship Downtown development close to Dubai's main business district, won't only lift Emaar's reputation globally, it also will boost the developer's revenue by almost $1 billion as residential units are delivered to owners. Most buyers are expected to close on apartments because they already have paid most of the sales price.
The tower's design by Adrian Smith, an architect at Chicago-based Skidmore, Owings & Merrill LLP until 2006, is drawn from the desert flower, hymenocalis. Skidmore continues to be in charge of the project, with Samsung Engineering & Construction and Belgium's Besix SA as its primary builders.
When finished, the skyscraper will have an estimated population of 35,000 over 160 floors, 54 elevators, almost a thousand residential units and more than 220,000 square feet of prime business space.
It also will house Italian fashion designer Giorgio Armani's first hotel with 160 guest rooms, four swimming pools, a cigar club, a library, spas and an observation platform on the 124th floor.
Emaar launched the first phase of sales of the 144 one- and two-bedroom Armani Residences apartments in October 2007, and they sold out. The building also has 900 other condominiums

At the height of Dubai's property boom, one-bedroom apartments were selling for between $1,715 and $2,776 a square foot on the secondary market, according to Betterhomes, one of Dubai's largest real-estate brokers.
One of the most expensive apartments on its books at the time was a one-bedroom apartment that sold for just over $3.5 million.
Today, prices have slumped between 50% and 60% and sales on the secondary market have stalled due to a wide gap between asking and offered prices. Few of the Burj apartments are listed on the secondary market.
The Burj Dubai became the world's tallest building in July 2007. In April 2008, it became the tallest man-made structure, exceeding the KVLY-TV mast in North Dakota, which stands 2,063 feet.
It isn't clear how long the Burj Dubai will hold the title of world's tallest. Plans for taller towers have been announced around the world.
Last year, Dubai government-owned developer Nakheel, which is building the emirate's iconic palm-tree-shaped archipelagos, said it planned to build a 3,274-foot tower in Dubai as part of a $38 billion commercial and residential project. The company has since delayed the project.

Source: The Wall Street Journal

Dubai's property market crumbles in crisis

Dubai famously used to boast the highest concentration of construction cranes in the world.
Now, its property sector has investors fighting for the return of down-payments on buildings that might never be built and state-linked developers continuing to fall behind on contracting invoices despite having received billions of dollars in bail-out cash.

Firesales saw drastic reductions at previously desirable locations such as the Palm Jumeirah, Dubai's first completed manmade island development, and at the Old Town district surrounding Burj Dubai, the world's tallest tower that is planned to open later on this year.

Colliers International's house price index survey indicates that prices have almost halved since their peak last year, but the pace of deceleration is slowing from 41 per cent in the first quarter down to 9 per cent in the second quarter of this year.

Ian Albert, regional director, says the real estate market should reach its bottom in the last quarter of this year.

He adds that some encouraging signs have emerged, including a 50 per cent rise in the volume of transactions. Developers are trimming down their project portfolios, but the market will still have to accept a surge in supply over the next couple of years, leaving the sector reliant on global economic recovery to lift Dubai's outward-looking economy up again.

Matthew Green, CB Richard Ellis's head of research for the United Arab Emirate, says that the overhang of new apartments and villas - as much as 20,000 new units this year - will keep pressure on the property market.

"Lower rents should encourage the return of the expatriate labour force, but we aren't seeing that yet," he says.

"Let's hope that can come in 2010, but such is the supply that we have to look for stability before a return to growth."

Source: Financial Times

U.A.E., Qatar Shares Drop on Earnings; Union Properties Slumps

Aug. 16 (Bloomberg) -- United Arab Emirates and Qatari shares retreated as oil prices declined, Union Properties PJSC reported a loss and profit at Industries Qatar slid.
The Dubai Financial Market General Index declined 2.2 percent while Abu Dhabi’s index and Qatar’s DSM 20 Index lost 0.5 percent each.
“People have been looking at earnings here even more than oil and other indicators,” said Rabih Sultani, hedge fund manager at Duet Mena Ltd. “The biggest weakness we’ve seen in Dubai is real estate, and that goes for Qatar too, so those companies are having the biggest drag on the market right now.”
Union Properties, the Dubai-based developer, fell the most in six months after reporting a loss. Industries Qatar, the region’s second-largest petrochemical company, fell to a two- week low after posting a first-half profit that declined 43 percent. Crude fell 4.3 percent on Aug. 14, finishing the week at $67.51 a barrel.
Crude prices, which have fallen 54 percent since their July 2008 high of $147.27 a barrel, have heightened the blow of the credit crunch on the region’s real estate and finance industries. Property prices in Dubai have slumped and the finance industry faced a slowdown. The six countries that make up the Gulf Cooperation Council collectively supply 20 percent of the world’s oil.
Union Properties declined the most since Feb. 22, dropping 9.6 percent to 1.04 dirhams. The developer reported a second- quarter loss after writing down the value of its properties. The loss was 228 million dirhams ($62 million) after a profit of 317.7 million dirhams a year earlier. Union Properties wrote down 304 million dirhams on the value of its properties, it said on Aug. 13.
Lower Demand
Industries Qatar fell 3.1 percent to 106.7 riyals, the lowest level since Aug. 2. The largest publicly traded company in the Gulf country said profit declined as the global recession cut demand for petrochemicals and steel.
Saudi Arabia’s Tadawul All Share Index added 0.3 percent to 5,855.25. Oman’s MSM30 Index gained 0.1 percent, while the Kuwait Stock Exchange advanced 0.3 percent. Bahrain’s measure fell by 0.4 percent.

Source: Bloomberg

Dubai Real Estate Down 50% From Peak.

DUBAI -- Home values in Dubai have fallen by about half from their peak late last year in the wake of the global real-estate slowdown, a widely watched index of Dubai property prices showed Monday.

Property prices in the emirate, which had been driven sharply higher in past years as foreign investors snapped up real estate, have been sliding since the third quarter of 2008.
But the decline showed signs of slowing in the second quarter, with prices falling 9% from a year earlier, after much steeper drops in previous quarters, U.K.-based real-estate consultancy Colliers International said in its quarterly price index. The measure, which collates mortgage transactions on properties open to foreign ownership since the start of 2007, is compiled using data from financial institutions accounting for 60% of the mortgage market in Dubai.
Like other places around the world, the emirate has been hit by a property slump as a result of the credit crunch.
However, Colliers said continuing concerns over the availability of financing, job-security worries for the emirate's many expatriates and a lack of transparency about project delays and postponements continued to hamper the market's recovery.
Property prices in Dubai were rising sharply as recently as the first half of last year. But since the third quarter of 2008, as the impact of the global crisis has drawn in on the emirate, real-estate agents have reported softening prices and a dearth of buyers, especially those buying investment properties which had earlier helped drive steep price increases.
The average price of property declined to 949 U.A.E. dirhams ($258) per square foot in the second quarter of 2009, compared with 1037 dirhams in the first three months of the year, Colliers said. Property prices are now at the same level as they were in the second quarter of 2007.
Between April and June, the price of villas and townhouses was hardest hit, with prices falling 18% and 11%, respectively. Apartment prices, meanwhile, dipped 3%, Colliers said.
However, the rate of decline during the quarter "decelerated dramatically" from the start of the year, when prices slumped 42% between the fourth quarter of 2008 and the first quarter of 2009.
"After a significant decline in the first three months of the year, the market witnessed a deceleration in the rate of decline in residential prices in the second quarter," Ian Albert, Colliers International regional director in Dubai, told Zawya Dow Jones in a telephone interview. "The magnitude of the decline that we saw in the first quarter was not, and is now very unlikely to be, repeated."
Colliers said the deceleration was mainly due to the slow release of liquidity into the market by financial institutions, the restructuring of loan-to-value ratios and the relaxation of strict lending criteria, leading to a 50% rise in the number of property transactions during the second quarter from the first three months of the year.
"In the coming months the market will be searching for further evidence of market stabilization as we draw nearer to the bottom of market prices," Mr. Albert said, adding that he was "cautiously optimistic" about the third quarter, even though figures will be distorted by the summer holidays and Ramadan.
Saud Masud, a real-estate analyst at UBS, said a decelerating price fall doesn't necessarily point to market recovery. "The underlying trends are not supportive of a recovery in the market anytime soon," he said.
The decline came after quarters of red-hot growth. Prices rose 42% in the first quarter of 2008, 16% in the second quarter and 5% in the third quarter, according to previous Colliers reports.

Source: The wall street journal.

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Upcoming supply to affect Dubai housing prices

We are seeing things starting to settle down almost everywhere in the world. Major stock markets have bounced off their 10 year or so lows and are trading in narrow bands, as are currencies, commodities, oil and bonds. For us, the good news is that property markets are starting to heal as well. Real estate investing is now no longer seen as being as much of a risky proposition, but rather as an opportunity resulting from a steep reduction in values. This shift in perception is a key factor in the stabilization of house prices across the world, and especially in the UAE.

In the UAE, with its low homogenous population, economic growth is accompanied by an increase in population. The global financial crisis resulted in large job losses, with the resultant population drain from the UAE. However, with the economic environment starting to stabilize, government spending staying robust and providing the adequate stimulus, businesses will be expected to start increasing their head count over the next 12-24 months. And finally, the UAE economy is more than just real estate driven, as we see evidence of this through transactions in our firm by individuals that are working in a wide array of business sectors. Adversity is a great teacher, and now, transacting in real estate has shifted away from the speculative and euphorically emotional approach of the last couple of years, to being driven by economic fundamentals. It has been reported that prices in popular areas around Dubai have risen between 5% and 10 % over the last few months. Moving forward, pricing trends are going to be determined by the combination of several factors that include demand versus supply for each property segment, mortgage availability, rental values, rental yields, seller motivation and population growth.

Villa communitiesIn the villa segment, the main established communities are Emirates Living, Arabian Ranches, Jumeirah Islands, Palm Jumeirah and the Green Community. Each community has developed a reputation over time, offering a variety of living options and associated pricing. In the two to three bedroom townhouse space, Springs, Al Reem and the Lakes are the primary options. Pricing in this segment has recovered significantly from its lows in the early part of 2009 and is now stabilized to the Dhs1.3m - Dhs1.4m range for two beds, while a three bed unit is around the Dhs2m-Dhs2.3m range for Springs and Al Reem, and in excess of Dhs3.3m in the Lakes. Though Palmera and Alma in the Ranches development also provide two and three bedroom townhouse options, since these were launched at higher prices than the current prices of similar properties, they are not being actively traded, other than for rental. For units in the Springs, Al Reem and the Lakes, financing is easily available, they are fully functional communities with no new significant inventory planned in the future. Therefore, we expect pricing to remain stable at these levels, and perhaps see some additional increases of another 5% after the summer, until such time that the Jumeirah Village communities are available and being delivered - towards the end of 2009. The Jumeirah Village project is expected to add significant inventory to the townhouse segment, which will most likely have a capping effect on any major price rises in this segment across Dubai until this inventory is occupied.

Impact of supplyIndependent villas are spread across Emirates Living, Arabian Ranches, Jumeirah Islands, Palm Jumeirah and Green Community, with inventory being added in Victory Heights, Jumeirah Park and Jumeirah Golf Estates. Within this segment there is further segmentation in the mid- to luxury level properties. Moving forward, in the mid-level segment such as the Meadows, Lakes, Saheel, Mirador and so on, we expect pricing to continue to increase due to the restricted supply and limited additional inventory in the market. Though Victory Heights and Jumeirah Park are starting deliveries, these communities have limited financing options and are still not developed as master communities with a lot of construction work still taking place. We expect the delivery of properties in these communities to be absorbed quickly without impacting pricing, and are of the opinion that steady price increases, in the mid-level villa segment, of up to 10% are possible through to the end of the year. In the luxury segment, inventory is limited, with minimal expected additional supply. This segment is targeted to the smallest and most demanding economic demographic, and quality of living plays a significant role in home choice. Therefore, the delivery of Jumeirah Golf Estate will not have a major impact on pricing until it is a fully developed master community. We expect pricing in this segment to continue to have upward pressure and could see prices increasing by more than 10% over the remaining part of 2009.

Apartment inventoryIn the apartment segment there is a very wide variety of options in the market, with a lot of additional inventory being made available over the course of the next 12 to 24 months. The key driver for prices for apartments will be quality of construction and location. Good quality projects in the Dubai Marina, Burj Dubai and Palm Jumeirah, with good views, are stabilized at around Dhs1,100 to Dhs1,500 per sq. ft. Projects with lower quality construction and locations range from Dhs650 - Dhs800 per sq. ft. We expect prices of lower quality buildings to stay in the current range as more inventory comes onto the market, however, in the higher quality segment, we expect some price increases of around 5% over the next six months. Burj Dubai will most likely experience the most increase as the community gets completed and the Burj itself is delivered.

Source: AMEinfo