The credit crunch has finally called an official end to the heady days of Dubai’s development boom
Overall prices fell by 4 per cent between September and October, according to HSBC Holdings, with villas falling 19 per cent. Property prices on Palm Jumeirah have fallen by as much as 40 per cent since September.
With no income from taxes or oil revenue to draw upon, the crunch has crippled the heavily indebted government and its developers, which have borrowed trillions of dirhams (AED) to fund infrastructure and expansion projects. The fallout has begun, with Nakheel scaling back work on Palm Deira and other major developments. Staff cuts across the industry began on 12 November, with 200 redundancies at developer Damac, followed by job cuts at developer Omniyat and the aforementioned 500 redundancies at Nakheel.
The week of my visit, as I toured architects’ offices developers were ringing up to postpone works, lengthen payment schedules or delay design programmes. Despite this, the mood was anything but grim.
‘I welcome it,’ says Mohajer, with an exuberant grin. ‘It means the market is maturing. We all want to get rid of the speculators. They were pushing property prices higher and higher and inflation was really hitting us hard – the staff were coming to me every two months and asking for pay rises.’
Gordon Affleck, design principal of RMJM Middle East, which is working on a 40ha masterplan for Palm Jebel Ali, also welcomes Dubai’s change of pace, despite having to make a small number of redundancies (AJ 20.11.08). ‘I wouldn’t say it’s been great, but it will pick up again,’ he says. ‘I don’t think it will be quite as mad as it was, which is good.’
‘Building to sell off paper doesn’t make a good city,’ he adds. ‘A lot of developers are building for end-use now. In five years, the urban grain will be far more sophisticated.’
As long as Sheikh Mohammed is ruler, Dubai will keep building. ‘It’s definitely to our advantage to have a forward-thinking ruler who likes quality architecture,’ says Corish.
The risks make it a difficult time to enter the market, but architects with well-established contacts in the region say Dubai is still growing – £848 billion worth of projects are planned and underway, with projects totalling £106 billion announced in October alone.
‘Dubai isn’t finished yet,’ says Morris. ‘We’ve seen a lot of their vision, and not all of it is great, but some of it is brilliant. It’s just whether it can be realised or not.’