DUBAI: A United Arab Emirates developer who says he’s waiting for a market rebound before starting a US$4 billion project expects the country’s property slump to run for another three years, despite the government’s moves to bolster the economy.
While a raft of state measures is taking the economy in the right direction, they’re not going to produce a turnaround in the short term, Waleed Zaabi, chairman of closely-held Tiger Group, said in an interview.
“The government is aware of the challenges and the rulers are prioritizing economic development,” said Zaabi, whose company owns thousands of apartments in the country. “This is positive. But rents are down 30% since 2016 and it will take two or three years before prices start increasing.”
Tiger has a few high-rise buildings under construction in Dubai, but a project to develop a complex of residential and commercial buildings about a half-hour drive into the desert from the airport won’t break ground until property prices start rising, he said.
The UAE’s federal and regional governments have reduced fees on businesses, loosened visa rules and proposed incentives to jolt an economy that has cooled after years of rapid growth. That’s boosting confidence — but not prices — in the real estate and construction industries, which contributed around 13% of Dubai’s US$112 billion economic output last year.
Lower oil revenue and weaker economies in the surrounding Gulf countries have hurt growth in the UAE, while rising costs have reduced the appeal of its biggest city, Dubai. Property sales are on pace for the worst year since 2012, down more than a third in the first half of 2018 to US$10.8 billion, according to the Dubai Land Department.
A global real estate slowdown is also having a ripple effect in Dubai, hindering local efforts to reverse the slide, Zaabi said. Still, the city enjoys rental yields of at least 6%, he said. Kuwait’s Kamco Investment estimates even higher returns — as much as 9% for mid-range apartments in Dubai. That income is helping Tiger ride the downturn and even expand, albeit cautiously, Zaabi said.
Zaabi, a civil engineer by training, built his fortune in Sharjah, the conservative emirate north of Dubai that’s popular with commuters because of its lower rents. He later balanced his holdings by expanding to Dubai. Zaabi’s assets were valued at more than US$750 million by the Bloomberg Billionaire’s Index in 2016. He said his net worth currently exceeds US$1 billion.
One way to spur the market is to give permanent residency to Arab property buyers from vulnerable countries such as Iraq, Syria and Egypt, Zaabi said. Dozens of employees, with their families, have left Tiger in recent years and emigrated to Germany or Canada, he said, despite taking a significant hit to their take-home pay. The government in May said it will extend visas to 10 years for some professionals.
“It would benefit the UAE to examine these immigration laws,” Zaabi said. “Some middle-class Arab professionals are moving to countries that extract almost half their salaries in taxes in return for education, healthcare and a path to citizenship. Many would prefer to stay here.”