No end in sight to the boom
If you've been following the media lately, you might think that the regional real estate industry is facing testing times.
If you've been following the media recently, you might think that the regional real estate industry is facing testing times.
Materials prices continue to surge upwards, financial scandals are beginning to touch the industry and there have been instances in recent weeks of developers trying to cancel projects. Meanwhile, the weak dollar is forcing contractors to increase wages right across the board.
Are these signs of an industry that is overheating? Elsewhere in the world, quite probably, but here in the Middle East, probably not.
Just look at the number of projects that continue to be announced. A look through this week's issue of Construction Week shows that ETA Star Properties will soon start inviting bids for the main construction contract on a US $1.09 billion tower development in Dubai Maritime City.
Nakheel is starting to hand out the first contracts for its new villa development, Al Furjan, and has just started flooding work on Palm Cove, which makes up the first of four main waterways at its massive Waterfront development.
Over in Saudi Arabia, Emaar EC has recently awarded a US $374 million contract to Saudi Bin Laden Group for the construction of 16 residential towers within King Abdullah Economic City.
Meanwhile, new projects continue to be sold out within hours of going onto the market and buyers are still snapping up homes on the resale market, despite huge recent increases in prices.
Are all these new developments based purely on optimism, or are they a natural consequence of high population growth and the unprecedented liquidity created by high oil prices and economic diversification policies?
One day, perhaps some years from now, local real estate prices may start to correlate more closely with average residents' incomes. For the time being, however, huge pent-up demand, growing money supply and a smattering of speculative fervour will ensure that the construction boom rolls on.
David Ingham is the Editorial Director of ITP Business Group.