Consultants are surprised at the speed at which developers are reacting to the downturn by making redundancies and suspending projects. But for many this correction has been a long time coming.
Project after project has been launched in the emirates seemingly without consideration for their capacity to absorb them. Across the seven emirates making up the United Arab Emirates, the number of projects planned per capita is higher than anywhere else in the region with developers pursuing projects that equate to spending of more than £185,000 per person. This compares to just £22,154 in neighbouring Oman and £15,289 in enormous Saudi Arabia.
Like the UK, which has been criticised for a lack of coordination between government departments, Dubai’s developers have been undermining each other, and some joined up thinking would certainly help. For example no sooner is government backed developer Emaar’s 700m plus Burj Dubai skyscraper well on the way to completion, than government backed Nakheel has announced its own 1km plus tower in the same city. Can it just be coincidence that in the same month, property prices in the Burj Dubai area plummeted by as much as 49%?
Although there was an oversupply of real estate developments coming to market, the good news for Dubai is that the government remains committed to investing in new transport, energy and water infrastructure. Developments with strong fundamentals will still go ahead, but on a more realistic timescale.
In a market that has been overheating for some time as clients race to finish projects in half the time taken in developed economies, a slowdown is no bad thing and Dubai could finally see inflation begin to fall as spending cools.
There are also some positive side effects for neighbouring states. Oman has been struggling to develop its infrastructure plans as a lack of contractors and consultants has frustrated schemes. Dubai may be slowing down but it is just one part of a large region where the opportunities overall remain strong.