Dubai developers are pressing ahead with their construction plans despite expectations that property prices will fall yet further this year, undaunted by memories of a 2008 crash.
Industry consultants say that while sales volumes have slumped in the emirate, structural changes to the market such as tighter regulations together with fewer speculators and developers should ensure a much softer landing this time.
But others worry about ripple effects from the dive in oil prices, even though Dubai is a small crude producer compared with fellow emirate Abu Dhabi, and wonder how all the projects that are being announced will be funded.
Residential prices in the emirate fell 50 per cent from a third-quarter 2008 peak to mid-2009, suffering a second downturn in early 2010, industry consultants Cluttons estimate.
Prices then rebounded from 2011 following an influx of money and people displaced by uprisings in several Arab countries, recovering to within 18 per cent of 2008 peaks.
But values slipped again from late 2014. Cluttons reckons they fell 3-5 per cent in 2015 and forecasts a similar drop this year; rivals CBRE say prices declined about 15 per cent last year and predict another 10 per cent drop in 2016.
This seems to have swayed developers little.
Emaar Properties says it will not change its plans despite sales revenue falling 28 per cent to Dh7.51 billion in the first nine months of 2015.
“Emaar is progressing as scheduled with all its projects launched,” said a spokesman for Emaar, builder of the world’s tallest tower, the Burj Khalifa.
The company, one of four big players in the Dubai market, has a backlog of projects worth Dh24.1bn in the wider UAE.
“Sales enquiries have continued to be robust, led by strong interest from regional and international investors,” said the spokesman.
Property markets can be driven as much by sentiment as supply and demand, so such overt bullishness is perhaps understandable. However, it ignores a 19 percent decline in Dubai unit sales and a 24 percent drop in the combined sales value in 2015, CBRE estimates.
It also echoes 2008 when that October the developer Nakheel announced plans to build a kilometre-high tower, which at almost 200 metres more than the Burj Khalifa would be a global record.
Barely a year later, Nakheel sought to restructure about $11 billion in borrowings and property prices were in free fall. Today a Dubai metro station is named after the lofty project, but the tower has yet to materialise.
Dubai has doubled property transaction fees and imposed tougher deposit requirements for mortgage borrowers. While this has helped to prompt the current downtrend, inflicting such short-term pain may ultimately lessen volatility by minimising speculative trading.
This marks a significant change from 2008. “The dynamics of the market this time around are vastly different … The fundamentals are a lot stronger,” said Faisal Durrani, partner and head of research at Cluttons.
Damac Properties, Dubai’s largest independent developer, also says it has not slowed construction as there is demand waiting to be met.
“There will continue to be an under-supply of completed units in the market; based on Dubai’s economic growth, demand should outstrip supply,” said a Damac spokesman. “It’s very much business as usual.”
Dubai officials have remained optimistic on economic growth in the emirate which has diversified into areas such as tourism more than larger oil exporters. In December, a government official estimated 2015 growth at around 4 per cent, close to levels of recent years.
However, the UAE has said it will be hard to achieve growth of more than 3 per cent across the emirates this year.
The spectre of over-supply still haunts the property market after the crash, which was partly due to an abundance of units being completed almost at the same time.