Arabian Business reported that a slowdown in Abu Dhabi’s construction market could unnerve investors and crimp any fledgling recovery in Dubai’s floundering real estate market.
Analysts have said that the oil rich UAE capital has pushed back the delivery of major projects including its planned Louvre and Guggenheim museums, in a sign it may be feeling the pinch of funding its USD 500 billion 2030 development plan.
For developers, many of whom had banked on Abu Dhabi to offset the collapse of Dubai’s property market in late 2008, the stalling of state backed projects is a source of concern.
Mr Charles Neil CEO of Landmark Properties said that “Abu Dhabi is being prudent from a financial point of view but this will have a big impact not only on Abu Dhabi, but Dubai as well. This decision will also have a major impact on the construction sector. With fewer people working in Abu Dhabi, rents can expect to weaken and this will impact on Dubai. It will not be good for the real estate sector in both emirates.”
Aldar Properties, Abu Dhabi’s biggest property developer, said that it would slash its workforce by 24% as it seeks to match manpower to a scaled back construction schedule. The developer was rescued by USD 5.2 billion bailout by the Abu Dhabi government this year after it struggled to stay afloat in the wake of a recession that halved property prices across the UAE.
Sorouh Real Estate said this month it saw state backed housing as a cornerstone of its short-term developments after winning about USD 1.5 billion worth of government projects since 2009.
Mr Andrew Goodwin director of real estate consultancy DTZ said that much of the construction industry had pinned its hopes on the security of government supported projects. The development of Abu Dhabi through the 2030 is fundamentally sound. But until the museums are replaced by other infrastructure projects, the postponement is a concern to the market.
UAE based contractors and real estate developers were hit hard by the global financial crisis with property prices dropping by about 60% from its 2008 peak. About half of construction projects in Dubai, the Gulf’s busiest builder until late 2008, were cancelled in the wake of the financial crisis, forcing firms to seek out work in new markets.
Analyst Mohammad Kamal said that “I can envisage infrastructure everything from civil and social infrastructure being completed and handed over. Things like schools, hospitals, roads, contracts on that nature are likely to go through. The bank described Abu Dhabi as fast becoming the worst construction market in the GCC after Dubai.
Mr Kamal said that cut throat competition and a scale down in government plans by 30% during the year should have repercussions on backlog and margins on Arabtec and Drake & Scull International.
(Sourced from www.arabianbusiness.com)
