Dubai’s real estate market has continued to slow down, with transaction values dropping across all sectors. Analysts have struggled with agreeing on whether the slowdown is a sign of a market in despair amid economic challenges or simply one that is maturing and enduring a slight correction.

The most common explanation for the slowdown is dampened investor sentiment caused by falling oil prices, but other factors such as concerns of an oversupply have also put downward pressure on pricing.

MEED speaks to Hesham al-Qassim, CEO of Wasl Asset Management Group in the company’s Dubai headquarters to gain an insight into the developer’s market projections and plans for the future. 

“The economy has its own cycle worldwide. Ultimately any development cycle is not less than 36 months – from idea to delivery you are looking at four years,” says Al-Qassim who says the developers in the region must not be heavily influenced by the current economic realities facing major cities such as Dubai.

“The real estate market is a vertical of our economy and in the UAE after oil and trade it is one of the most important economic verticals. Whenever the economy slows by default real estate is often affected first.”

“Why are we talking about UAE economy when today the world wide economies are under pressure.” Al-Qassim says the UAE is facing a slowdown in the coming years, adding that the economy will “boom again from the second half of 2017 leading up to the Expo in 2020”.

Factors outside of declining oil prices such as a strengthening dollar and increased US interest rates have made Dubai a more expensive place; analysts have also raised concerns over the increasing cost of finance in the region with local banks struggling with liquidity.

Changing market demands 

“From Wasl’s point of view we take into consideration the economy. But we ensure that all projects have their own funding and before handover we ensure it is ready for selling and leasing. We are always ready to develop and hold our inventory – we do not depend on retrieving cash,” says Al-Qassim who also reveals Wasl does not rely on debt financing for projects with “key developments pushed through with the company’s equity.”

Dubai’s real estate market also suffers from supply and demand economics and an oversupply of properties overhanging over from previous development cycles. One segment that is not held back by oversupply is affordable housing. Analysts have said Dubai will fail to serve the low-to-mid-range residential market as long as affordability definitions remain ambiguous.

“Defining affordability is impossible but developers need to offer the right mix. There is a big range in the market. But where is the real gap. The gap is in the mid and high mid range. That is where the shortage is, says Al-Qassim. “Loads of developers are trying to break that gap. Wasl’s success is based on these segments – since 2007 we have been trying to supply this segment of the market. But we are one developer and we cannot supply the whole market.”

In early February Wasl invited contractors to express interest in working on an estimated AED2.5bn ($681m) low income housing development in Dubai.

The proposed low income residential development is located in Al-Qusais Industrial Area and involves the construction of 81 four storey buildings along with other community facilities. There will be two types of residential building made up of mostly one and two bed units with some studio and three-bed apartments that will be built using precast modules. The total built-up area will be about 770,000 square metres.

The company has also started preparatory works for the Wasl Dubai Gate development in the Jebel Ali area. The local Port Saeed Transport & Building Contracting Company is working on a package covering bulk earthworks and the demolition of workers camps in the area.

The project is located on a 1.5 million square-metre site next to the Energy metro station in Jebel Ali across Sheikh Zayed road from the Dubai Aluminium complex.

“Wasl Gate and Wasl park 1 in the Al-Kiffaf area are perfect examples of the group not depending on any finance,” says Al-Qassim.

Wasl continues to lead the Dubai’s quest for more affordable housing and moving forward the company CEO believes that developers must take part in this drive towards affordability. Al-Qassim also says that contractors have a role to play and invites more international firms to enter the UAE market to “take part in the country’s second phase of development,” where he believes a more mature market will emerge.

Planning for Expo 2020

Moving forward Al-Qassim says the developer will focus on the company’s third vertical of business, hospitality and leisure. “We are planning to develop 15 hotels leading to 2019 (5,000 hotel rooms) Before Expo 2020 we plan on having 10,000 rooms.” Al-Qassim also told MEED that he believes that there is a big mismatch in the hotel market. “More than 70 per cent [of hotel supply is currently] in the 5 star range. We need to change that equation to have more affordable hotel rooms for city visitors.”

In February, Wasl awarded the local Al-Basti & Muktha was awarded an estimated AED700m ($190m) deal for the construction of the Mandarin Oriental Hotel in Dubai. The project is owned by Dubai Real Estate Corporation (DREC) and the local Wasl Hospitality is the development manager.

Another major project planned is Wasl Tower. Wasl informed contractors during workshops in September last year that the construction contract would be tendered in early 2016.

The 60-storey tower will be about 300 metres tall and will feature the world’s tallest ceramic facade. It has been designed by sustainability expert Werner Sobek and architect Ben van Berkel.