Dubai developer calls for property supply freeze
November 25, 2019 - Dubai
Dubai needs to halt all new home construction for one or two years to avert an economic disaster brought on by continued oversupply, according to one of its biggest builders.
“We’re entering a crossroads now,” Damac Properties chairman Hussain Sajwani said in a Bloomberg interview.
“Either we fix this problem and we can grow from here or we are going to see a disaster.”
Damac’s chairman is the latest executive to call for curbs on construction in a market that’s been on a downward trajectory since it peaked five years ago.
The slump has defied all predictions of a rebound as house prices fell around 30%.
About 30,000 new homes will be built this year, twice the demand in the Gulf city, property broker JLL estimates.
Damac has dramatically reduced new sales in the past two years and will focus on selling the properties in its inventory, Sajwani said. Still, the developer will complete 4,000 homes this year and an another 6,000 in 2020.
“All we need is just to freeze the supply,” Sajwani said. “Reduce it for a year, maybe 18 months, maybe 2 years,” he said.
Dubai has recently created a committee to limit supply and ensure that private developers operate in fair environment.
Sajwani pointed at his competitor Emaar Properties as the main culprit in the oversupply and said the company offers payment plans that encourage speculation.
The majority of other big developers, including Meraas Holding and Nakheel, have halted new construction or cut it back by about 80%, while Emaar continues to “dump” properties on the market, he said.
Damac’s share price has fallen 40% this year and the company won’t pay dividend this year because profitability is down. Sajwani said he prefers to keep the cash in the company to meet financial obligations.
blog, real estate bubble, real estate developers, property developer, Damac Properties