The situation has worsened over the last two weeks forcing consultants to cut back on recruitment. "There has been a slowdown in the last 14 days. We’ve had three or four projects in the property sector put on hold," Hyder Regional Managing Director Middle East, Kevin Jones told NCE. "There is a cooldown and clients are taking stock of the situation and are wondering how far it is going to go."
Other firms agree that developers are delaying their schemes. "A number of developers have told us that certain projects are on hold," said Dubai-based Mott MacDonald divisional director for buildings Steve Rayner. "They say they are not shelving them, but that they are putting them on hold for three to six months to see the effects of the downturn in the property market." Projects known to be affected include Nakheel’s third offshore island Palm Deira and another off shore development called The Promenade.
Real estate has been the primary driver of the Dubai construction boom. Property development and associated infrastructure drive a construction market estimated by NCE’s sister magazine MEED to be worth more than £800bn across the United Arab Emirates. Between September and October property prices have plummeted by as much as 49% in some parts of Dubai as investors have reacted to the spiralling prices and banks have tightened lending requirements.
Apartments in the Burj Dubai area of the city, where the world’s tallest building now sits, were on sale for $12,894 (£8,596) per square metre in September and in October plunged to $6,591 (£4,394) per square metre, according to figures from merchant bank HSBC. Overall, property prices have fallen by a more modest 4% but HSBC has called this a turning point for the emirate’s property sector. Other banks are echoing this caution by requiring larger deposits from property buyers seeking loans.
Developers have reacted by scaling back their plans as they wait and see how demand for their properties unfolds. "Most companies are in a bit of a flat spin about it as this has hit the emirate pretty quickly," says Rayner. Some developers have confirmed that they will be letting staff go. One of Dubai’s biggest developers, Damac Properties, is making 200 job cuts. Chief executive Peter Riddoch said the tough decision had been inevitable in the light of the severe slowdown in the worldwide property market. "We regret that we have to lose colleagues but we believe that taking an early decision was the right thing to do," he said and stated that other firms would follow.
Developer Emaar, whose share price has plummeted, has also indicated that it is cutting staff . Consultants said this would inevitably impact on their own recruitment levels. "We will pull back slightly on recruitment but there will be no lay offs,” said Rayner. "We cover a lot of sectors and parts of the region so we can focus on other areas such as oil and gas. We planned to have an additional 500 staff in the building division by 2012. Now it might be more like 350," he said.
Consultants worried at the prospect of a sudden downturn in Dubai are gathering at the London offices of British Expertise today to discuss how to handle the issue. "Two months ago the feeling was that Dubai would be unaffected but some of our members have approached us to say they are concerned," said British Expertise’s director for Middle East and Africa Dominic James.