It appears that the luxury property developers in Dubai are finally beginning to come to terms with reality, and after months of press releases claiming that Dubai was immune to the global downturn are starting to change their tune. Prices for luxury property in Dubai “fell off a cliff” in the last quarter of 2008, and many developers saw as much as 85% wiped off the value of their shares in 2008. That trend continues this year as they are forced to writedown assets based outside the UAE and post further losses.
Emaar Properties, the largest developer in Dubai and builder of the Burj Dubai. the tallest building in the world, posted a $481 million loss for the fourth quarter of 2008 after writing down the value of John Laing Homes, a US subsidiary. Their shares fell another 8%, bringing the drop this year to 19%. Emaar are now applying pressure to their suppliers in an effort to reduce construction costs, although many of their upcoming projects have been cancelled.
Similar issues face the Abu Dhabi developers with prices falling 20% in the last quarter of 2008 and the slump accelerating. Aldar properties, one of Abu Dhabi’s largest said they were considering switching some of the planned luxury projects to low income housing instead. This is quite a turnaround, but may actually be a positive thing in the long run. Developers in Dubai particularly, concentrated almost exclusively on luxury property, creating a huge imbalance in the market.
One enormous problem on the horizon is the fact that none of the developers have written down the “assets” on their books. This is an issue facing the government also. Dubai’s debt to GDP ratio is a rather spectacular 148% currently, and in a recent statement by Emaar chairman, Mr Mohammed Alabar (who also happens to be a member of Dubai’s executive council) a claim was made that Dubai’s companies owed $70 billion against an asset base of $270 billion. This asset base is almost solely property based, so we expect an adjustment to be made there soon. Dubai has already been forced to take an undisclosed amount in loans from their oil-rich sister, Abu Dhabi, and I suspect they will be back for more soon.
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Hi as a cient as we purchased and paid up three quarter of our investment in Eden gardens from 2006 and were promised to completion of Eden Gardens as today it is at the same land unbuilt.
How do we proceed?
I suggest a lawyer. Many are facing the same problem – there are a number of investor’s groups banding together to sue the developers. The laws heavily favor the developer though. Good luck.