It’s global and by that we mean, even the Arabs are struggling a bit.
During the start of the recession we were taking a second look at our piggy banks and trying to adjust to a future of thrift and wise spending habits. On the other hand, the folks in the Middle East were still busy launching their real estate developments in the residential and commercial sectors. On top of that, everyone in these Arab countries seemed to be so giddy with their latest Guinness record feat that building the tallest, widest and most innovative seemed quite normal after earning a lot form their oil reserves.
But recently, a spate of bad news seems to be defining the slowdown in their burgeoning market. Here are some surprising reports:
Real estate developer and media tycoon Sheik Sulaiman al-Fahim started the Hydra Village in 2007. The UAE’s 2,500-villa eco-community is sadly not going to get finished by 2011. According to the New York Times, “But with the development hardly begun, Hydra Village investors, most of whom are foreigners living in this oil-rich emirate, are in no mood for promises. Instead, they have started demanding that Mr. Fahim prove he has adequate funds to follow through on this project. … According to an internal Hydra spreadsheet viewed by The New York Times, the company is having difficulty collecting payments on its slow-moving projects. The document lists more than 1,000 investors who are late paying what they owe — a total sum of more than $65 million… Prepaid real estate investments are high risk by nature, and some here hold the view investors — who in many cases plunked down money without even signing a contract — are getting their due.”
The construction of the Trump International Hotel and Tower in Dubai has been suspended indefinitely. Along with other projects such as the Palm Deira, The Universe and Nakheel Harbour and Tower, the Al Habtoor Leighton Group admits to having affected by the global financial crisis.
In Kuwait, the property market is also on a drought as real estate sales plunged at the start of the year. According to a report, “Official figures show that residential sales, which represent the biggest proportion of total sales, fell 72.6% year-on-year to 34.59 million dinars ($117.3 million). Investment property sales fell 45.6% in January while commercial property sales were up 22.7%. Real estate sales were down 45.9% in December and 43.3% in November.”
Well America, you’re not alone in this crisis. Even the world’s wealthiest are vulnerable to downturns in real estate. Only this time, the effects are too harsh and they’re aimed at the black gold magnates.