Damac Properties comfortable with new Dubai property regulations
Damac properties, one of the largest real estate developers in the Middle East, has today commented upon an array of new regulations brought in by the Dubai authorities to combat the boom and bust of years gone by. The 2008 Dubai property meltdown will go down in history as one of the more surreal events in the worldwide property market having only emerged 10 years prior to the collapse. It is common knowledge that many investors lost a significant amount of money as the seemingly unstoppable rise in Dubai property prices suddenly came to an end!
Damac Properties is on the verge of a $500 million London stock market flotation and is very much in the news especially bearing in mind its large exposure to Dubai and the Middle East property markets.
Can new regulations stop boom and bust?
While there are an array of new regulations about to come online in Dubai, with regards to lending, deposits and actual development of properties, the battle to avoid the boom and bust scenario has been going on for centuries. The fact is that boom and bust is directly related to human nature, fear and greed, and while there are ways and means of reducing the impact on the downside and the upside, we will never be able to totally avoid this potentially catastrophic cycle.
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The Dubai authorities have already brought in regulations regarding a 20% deposit for construction costs on new developments, each project has to be registered with the authorities and banks in the region have been given “good guidelines for lending”. There is some speculation that we could be nearing the first real challenge of these new regulations although others believe that the ongoing increase in property prices across Dubai will soon begin to slow down.
Property developers support new regulations
In order for these new regulations to work they need to have support from within the property development arena which appears to be the case at the moment. When you bear in mind that at present there are only two major property developers in Dubai, against the 100+ in the boom times of 2008, perhaps some of the more speculative players have been priced out of the sector. The fact that Damac Properties is supporting the move should ensure a more controlled property market in the region and hopefully the authorities and the business arena will be less naive about the boom and bust scenario.
Coincidently this comes at a time when Damac Properties is suggesting a move away from its Middle East/Dubai property base with London apparently on the radar. It will be interesting to see what kind of investment outflows begin to leave Dubai with other areas of the world starting to show signs of recovery.
Conclusion
It is imperative that all elements of the Dubai property market support the ongoing regulatory changes by the Dubai authorities. The boom and bust of 2008 saw a 60% crash in property prices leaving many investors decimated and property companies literally disappearing overnight. Many believe that this boom and bust episode caused irreparable damage to the Dubai property market and the country’s reputation but over the last two years we have seen an increase in investment and property prices.
Investors and developers seem more comfortable with the current situation in Dubai but will they be able to maintain a level head as prices continue to move forward?