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Dubai Vision

publication date: Apr 5, 2009
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author/source: Danielle Simpson
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While some argue that Dubai’s property market has ‘bottomed out’ under the weight of the global credit crunch, savvy developers argue that transparency and creative marketing are the keys to further growth.

Dubai has never had a problem grabbing international headlines. Over the last decade, the emirate’s desert landscape has unfurled into a hub of cosmopolitan activity but in recent months property prices have fallen in some areas by as much as 60 per cent, with many areas seeing a decline of 40 per cent to 50 per cent.

Although the number of registered developers has halved during the downturn, from 800 to just over 400, master developers are rebuilding the ‘confidence crisis’ by focusing on their core business strategies and implementing these alongside government initiatives which ensure the supply of developers to the market is better regulated.

Now more than ever, government bodies are working with developers to promote long-term economic stability in the region, whilst developers are employing ever-more powerful marketing techniques to penetrate target markets including the UK, the former Soviet Union, Africa, Europe and the Middle East.

Surviving in the Recession

The Real Estate Regulatory Agency (RERA) is the latest move of the Dubai government to improve Dubai’s approach to real estate by delivering the most trusted and transparent real estate registration system in the world. As well as regulating the market, it’s done much to improve the transparency of real estate here.

Peter Riddoch, CEO of the largest private real estate developer in the Middle East, Damac Properties, said, “In general terms, greater transparency equates to lower risks and increased certainty, which provides for informed decisions and increases the confidence in investment decisions. Most importantly it gives us market information and a fair and efficient legal and regulatory code of conduct.”

While other markets in the region are also improving transparency, Dubai is moving faster towards the maturity curve because the RERA surpasses regulation by focusing on co-operating with master developers. By introducing a stringent system of guarantees and policies too, customers feel safe their money is being used in accordance with their contract.

“Investment volumes in Dubai have increased dramatically since the freehold laws were introduced, which in turn has had a cascading effect on the overall business environments,” adds Peter. Rebuilding the crisis of confidence can’t be achieved overnight but since 2006 alone 11 new laws have been introduced to enhance the stability and confidence in the Dubai real estate market – and it’s these laws that are now helping to bring continued investment into the emirate.

RERA predicts that 20 per cent of the 30,003 units entering the market this year will be delayed, in addition to 40 per cent of the 44,880 units brought to market in 2010, however many visionary developers and agents are strategically placed to weather the economic storm and are confident they will generate healthy numbers of sales this year.

Hamptons International expanded into the emirate this February by establishing a Commercial Sales and Leasing Team in the region. The company’s worldwide presence is key to reaching a wide cross-section of buyers and by diversifying the services offered in Dubai’s property and commercial sector, Hamptons International hopes to better meet the needs of its global client base.

Hamptons’ Commercial Sales and Leasing Manager, Louise Key explains: “Market research shows that, despite the global financial situation, Dubai is still an attractive business destination. The taxfree environment and entrepreneurial initiatives, such as the creation of industryspecific free zones, are strong incentives for business. The growth projections for Dubai and the focus on diversified industries indicate that there is room for sustained demand in the near future”.

Innovative Marketing

While most companies have made drastic cuts in marketing and sales budgets to remain afloat, a Dubai, London and Moscow based firm, The First Group, is investing heavily in marketing throughout Dubai and globally. “During a recession, marketing is usually the first to feel the pinch, with many companies viewing it as a superfluous luxury,” says Rob Burns, Chief Marketing Officer at The First Group in Dubai. “But we believe the downturn is a time when good and creative marketing can really prove its worth. Our marketing is more efficient and defined than ever before, in order to deliver a concise message to investors during times of uncertainty.”

Just over a month ago the company secured the naming rights for the Madinat Theatre in Dubai, one of the city’s most established cultural venues. The partnership, between the company and the Jumeirah-owned theatre, is a striking example of how the property industry is penetrating the very infrastructure of Dubai to gain market share.

The First Group has even gone so far as to finance a helicopter-style cinema at their showroom where ‘virtual helicopter tours’ of Dubai are piloted by virtual celebrity sports stars such as Michael Owen and South African Rugby player Bryan Habana.

“We decided to bring Dubai’s attractions to investors by offering them a bird’s eye view of Dubai’s highlights, as well as the locations of The First Group’s various ventures.” explains Rob. The route takes in the sights of a number of iconic landmarks then heads towards Dubai Sports City and on to a number of The First Group’s signature ventures.

While some of the UAE’s developers have relied heavily on speculative buyers, the survivors are clearly those who have taken time to build a solid reputation. Financing expert Almas Capital puts the success of such companies down to key factors including market knowledge, financial stability and transparency. It highlights The First Group’s property portfolio as affordable accommodation which appeals directly to the average UAE resident and visitor’s income – and this is significant.

Rob Burns also notes the fact that not all developers have seen price drops of up to 60 per cent: “These numbers are grossly exaggerated – while we have offered discounts to react to the economic times, our prices have remained stable. Any developer that has dropped their prices by this much was either too over-priced in the first place or not running a very efficient business.”

The diverse collection of sporting stars throwing their weight behind this brand have all purchased property at the company’s Dubai Sports City locations or at Metro Central, and with names like Ryder Cup captain Sam Torrence, cricketer Andrew Flintoff and Russian Tennis Ace Svetlana Kutzsnetsova on board, the pool of celebrities is proving to be another powerful marketing weapon in attracting buyers and investors to the emirate.

According to Martin Jackson, Director at International property brokerage IPB Ltd, the market for villas is still very buoyant and shows no sign of slowing down. “It’s the apartment sector where the major problems are due to over-supply. Some tower blocks are completely unsold and other construction projects never got off the ground due to construction companies running out of finance.

“The wise construction firms are those that have partnered with international companies such as Al Futtaim Carillion, Al Nabouda Laing and NASA Multiplex, and local developers working with international construction companies who have the capacity to weather these difficult economic times.”

With many marketing initiatives coming to the fore, Martin highlights a successful promotion by one local developer in the form of a “Rent-to-Buy” scheme. “The purchaser has a two-year option of fixed rentals and an option to buy after the first year with a 70 per cent return on their rental payments and after the second year a 60 per cent return on their rental payments. This scheme is proving very successful for expatriates who are unsure of their job security over the next one to two years. Furthermore, IPB have been working with international fund managers who want to assist the developers with huge cash injections, which are offset against property sales with a 20-year lease-back scheme. This, we hope will inject some much-needed capital back in to the market.”

Meanwhile Damac Properties is using its prowess in progressive building projects to demonstrate its commitment to customers and is set to meet the summer delivery deadline at Emirates Garden. Chairman of Damac Properties, Hussain Sajwani, said: “It has not been easy to keep our focus and remain so positive in these turbulent times but we believe progress of the type we are making at Emirates Garden is the only way forward in reflecting our commitment to our customers. We have stated our intention to hand over more than 7,100 units to customers in the next two years and Phase One of Emirates Garden will contribute more than 500 of these. We currently have more than 18,000 units under construction and we will continue to stay focused on the job we have to do”.

It is vision and creativity like that displayed by the Dubai government and master developers that can serve to give companies an edge that would be coveted even in the most steady of times. Indeed history shows many successful brands were launched during recessions – Microsoft, Burger King, HP.

When it comes to the year ahead, this emirate is optimistic – and it’s worth remembering that the progress we see to date is only 10 per cent of H.H. Sheikh Mohammad’s ‘Vision of Dubai’.

Danielle Simpson has worked in the property industry for nine years as a writer and PR and marketing consultant.