Developers need to get their launch timing spot on

For developers, it’s always easy to set pricing strategies in a market that is on the up and up.

But when buyer sentiments are decidedly lukewarm and when you need to push through new inventory, a developer just doesn’t have a similar leeway. And he will always be assailed by doubts on whether it is best to sit out the tight market conditions and refrain from a launch.

“Speculating long term improvement is not wise in a region where cold and hot spells occur frequently ... and in no real pattern,” said Sofia Underabi, Head of Residential Valuation at Cavendish Maxwell. “These are impacted by many factors such as political movements and instability in the region, the price of oil, the crisis in Europe, the Chinese economy or a simple change in domestic regulations — although these are often in favour of developers.

“Having said that, the majority of new developments were launched in 2014 and the cold spells occurred thereafter. Perhaps they are planning to sit out the cold spell but, as I mentioned, it is not wise to speculate.

“The time value of money will [also] have to be considered by cash-rich developers, who may not have the comfort to wait.”

And, maybe, developers just got carried away with the whole momentum of launching. ‘The surge in the number of project announcements over the last two years, which has been a direct result of confidence injected into the market by the 15 per cent rise in average residential values over the same period, has translated into a strengthening supply pipeline through to 2017,’ said a new report issued by Cluttons.

‘Stiff headwinds in the form of Federal mortgage caps and general affordability challenges have been exacerbated by a rise in the number of project announcements; 41,000 units have been announced so far this year.’

But amid the downturn, there is one stark reality — “From their peaks in November 2013, prices in Dubai have receded by 33 per cent across the board,” said Sameer Lakhani of Global Capital Partners. “And in select instances with ready property, values have been shaved off by as much as 50 cents to a dollar. These are steep drops.”

Source: Manoj Nair, Associate Editor,


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