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Dubai crisis… housing projects halt amid real estate paralysis

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The economic crisis in Dubai is escalating in the UAE, leading the biggest real estate companies to stop housing projects to avoid further losses in light of the near paralysis of the real estate sector in the emirate.

The head of Damac Properties has called on property developers to refrain from launching new housing projects in Dubai for at least one year to accelerate the recovery of a market where prices have fallen sharply.

“We need to let the market stabilize,” said Hussain Sajwani at the company’s Dubai office, noting that DAMAC launched one project this year, compared with two in 2018 and about five or six projects a year in previous years.

Sajwani, who founded Damac in 2002, said this year is harder than the previous one, which is bad for the country and for the market and will hurt them. The situation could worsen if no action is taken.

He continued: “Everyone will be a loser client, developer and the city,” pointing out that he briefed the ruler of Dubai, “Mohammed bin Rashid Al Maktoum” his views on this matter.

In September, Bin Rashid announced that the Dubai government was forming a planning committee to regulate the real estate sector, which contributes significantly to the economy of the emirate, which does not have much oil or gas resources.

Dubai has faced a slowdown in the property market for most of the past 10 years, with the exception of a brief recovery period more than five years ago. An oversupply in the housing sector has led prices to fall by at least 25% since 2014.

The slowdown has put pressure on Dubai’s biggest property developers, including DAMAC, whose second-quarter net profit fell 87% and its shares have lost about 40% since the start of the year.

Dubai faces a high public debt estimated at $123 billion, or about 110 percent of GDP. Two-thirds of the debts of Dubai-linked companies are due by the end of 2023.

A few days ago, an international report predicted an increase in property prices in the emirate of Dubai, which faces a record economic crisis that has been unprecedented for years.

The decline in the residential property market in Dubai is due to the continued oversupply of 50,000 new units in 2019, a 150 per cent increase from the 20 units delivered in 2018 A unit.

The report, entitled “The Real Estate Sector in Dubai during the Third Quarter of 2019,” predicts that the residential real estate market in Dubai will witness further correction until the end of this year, as it is expected to see a 5% decline in prices in general.

The ratings agency Fitch predicted at the end of September that the continued decline in property prices in Dubai would threaten the quality of bank assets. UAE banks offer huge loans to real estate companies, apartment buyers and villas.

Weakness in Dubai’s property market is likely to further put pressure on the quality of UAE banking assets, the agency said.

Property prices in Dubai have fallen by 25-35 per cent since mid-2014, and analysts expect further declines this year and next, amid a slowing economy and an oversupply of housing units, an agency survey showed.

The average rent for apartments and villas in Dubai continued to fall by 1 per cent in the third quarter from the previous quarter.

The three-year lease freeze, currently being considered by the Dubai Land Department, is expected to contribute to a revival of the rental market.

Overall sales prices for apartments and villas in Dubai continued to decline by four per cent and three per cent, respectively, during the third quarter of this year compared to the previous quarter.

The report said that the value of real estate transactions on finished units increased by 16 per cent, while those on units available on the scheme increased by 46 per cent during the third quarter of this year compared to the previous quarter.

Transactions on completed real estate during the first nine months of this year amounted to 22 billion dirhams ($ 6 billion), while transactions on units available on the scheme amounted to 26 billion dirhams ($7 billion).

The US government rating agency S&P Global estimated Dubai government debt at $65 billion, or 56 per cent of GDP. Government debt is estimated at $60 billion.