Confessions of a Real Estate Agent - March 2018Posted on: 19th March 2018
In a recent Dubai Eye (103.8FM) Business Breakfast discussion, the early morning trio of Malcom, Brandy, and Richard interviewed Sam Graham from Rider Levett Bucknall about his RLB global crane index which shows that the number of fixed tower cranes in Dubai increased over the past year by 26%.
There are now 1128 cranes in the city, mainly deployed at private residential and commercial projects scattered across the city.
To put that number into perspective, the US city with the largest number of cranes, Seattle, has 62 operating cranes while in the entire country of Australia (92 times larger in area to the UAE), 680 cranes silhouette the skyline, just over half those in Dubai.
Richard Dean, one of Dubai Eye’s presenters, commented after a discussion about how budgets are now much tighter and investors are seeking to secure greater value earlier on in the investment cycle. He responded, “less vanity and more sanity” as it emerged that design, not construction, now reigns supreme in one of the world’s fastest growing city.
Those of us who have lived in Dubai longer than 10 years can still remember the heady real estate days of ‘more vanity and less sanity’ when the ethos “build it and they will come” dominated developers’ investment decisions. Looking back, crazy construction ideas like a tower of rotating floors that would independently generate electricity and a 130,000m2 ski resort complex called Dubai Snowdome in Dubailand were farmed out to in-house architects who then operationalized them into CAD drawings.
Before 2007, after putting down a deposit to secure the land, almost anyone could become a developer by designing a brochure and begin to sell off-plan property, the proceeds of which then went towards paying for the land and help to start construction.
With the creation of RERA in 2007, developers became more tightly regulated and monitored. The old ethos quickly disappeared as developers came under increasing pressure from investors seeking more secure returns after the 2008 ‘crash’, the impact of RERA inspections, and investor/purchaser payments linked to construction progress rather than arbitrary chronological benchmarks.
Now, developers must build 20% of the development before they can start selling and tighter financial regulation means that developers must deposit 20% of the total construction value with RERA.
It has forced developers and designers to be more effective in everything that they do. Better technology and modern business practices produce efficiencies in design and construction un-realized in that pre-2007 era. Apartment sizes have reduced over the years as designers find more space through better design.
And as greater sanity replaced vanity in the marketplace, design became paramount. Instead of 3 months of in-house design followed by three or four years of construction, now the developers are spending a year designing and tweaking with the assistance of external consultants and architects followed by a significantly shorter and more efficient construction schedule.
All this means that Dubai has now one of the most strictly regulated real estate markets in the world. And this is good news for potential investors who may still mistakenly fret when they listen to occasional whispers and cautions from family and colleagues of Dubai’s ‘dark days’ in her youth.