UAE construction costs to soar

[centurygrove]

we got our money back from gowealthy after threatening legal action but they did try to avoid paying. They wanted us to take our claim against the developer and not them as an agent. However they did pay, after my recent rip in october construction does not look much further on.

[DAYFox]

Originally Posted by centurygrove

we got our money back from gowealthy after threatening legal action but they did try to avoid paying. They wanted us to take our claim against the developer and not them as an agent. However they did pay, after my recent rip in october construction does not look much further on.

Which project you have invested in?

[centurygrove]

I have bought an apartment in the marina which i have just took possession and am about to buy office space in a commercial tower in the business bay. Office space in the business bay is the way forward with very high returns and i think personally there will be great capital appreciation as the Emaar have released 5 towers at 3600 aed per square foot. I am paying about 2000aed per square foot in the Canadian Business Centre which will be completed in late 2008 and it will be one of the first towers to be delivered. Construction has commenced, and the works are on target,.

[DoBuy]

Originally Posted by centurygrove

I have bought an apartment in the marina which i have just took possession and am about to buy office space in a commercial tower in the business bay. Office space in the business bay is the way forward with very high returns and i think personally there will be great capital appreciation as the Emaar have released 5 towers at 3600 aed per square foot. I am paying about 2000aed per square foot in the Canadian Business Centre which will be completed in late 2008 and it will be one of the first towers to be delivered. Construction has commenced, and the works are on target,.

Out of interest do u think with so many office towers going up in BB how easy will it be to rent?Especially with cheaper options such as silicon oasis where a number of office towers will be available within the next 18 months.

[DAYFox]

Originally Posted by centurygrove

I have bought an apartment in the marina which i have just took possession and am about to buy office space in a commercial tower in the business bay. Office space in the business bay is the way forward with very high returns and i think personally there will be great capital appreciation as the Emaar have released 5 towers at 3600 aed per square foot. I am paying about 2000aed per square foot in the Canadian Business Centre which will be completed in late 2008 and it will be one of the first towers to be delivered. Construction has commenced, and the works are on target,.

I bought in BusinessBay (OntarioTower) as well and YES I think this is the best option when you want to invest in realestate in Dubai.
Which towers from Emaar are you talking about? 3600AED is a lot, too much for the circumstances now, maybe later when Phase I is completed these prices sound reasonable. I heard currently the sqfeet price in BB is 1500-2500AED.
Anyways, BusinessBay will come up and definetly you will have great returns.
But I bought for 1100AED in 2006 and now I am a little bit worried that the developer is not able to absorb the increase in construction cost.. But at least groundwork is done and tower is rising, so eveything seems great!! Additionally it will be one of the first towers which is ready, so outlook very good!

[mpat]

In short , no one would like to shrink his profit margin,even if they can absorb incresed cost,profit will be low and that is undesired.

[wesrae]

Firstly the Developers in Dubai have been living on easy street for the last 4/5 years creaming on massive proffits. I work for a Project Management Company acting as Client Representative for the largest developer in Dubai, and have seen first hand the margins.

It is correct to assume that developers will try to "Value Engineer" either to maintain margins or even to increase them. This will take place on every project at some stage regardless of the project profile.

What we must understand is that once a developer has let the Main works packages to the Contractor he has offset the majority of the risk. Any price escallation will then be absorbed by the Contrator, who will have calculated any anticipated price increases. What has happened over the last 2 years is that Contractors working at rates agreed 3 years ago are realising that they seriously underestimated the escallation!

Now this is where the Major developers have hired large, international, reputable Contractors who will absorb these costs. The problem comes where developers have tried to hire small Contractors and get their Projects built "on the cheap". These small Contractors simply cannot absorb the increases so end up cap in hand to the Developer. Dependent on the state of affairs and the generosity of the Developer he might be assisted or he might be removed from the Project and his Performance bond encahsed from the bank.

Really the Developers are in very strong positions always maintaining positive cash flow, with large margins.

Cases like Dubai Pearl are a bit different - the Developer was bought out. The new developer did now want to undertake this work and through some legal loophole sold on the already started development.

[DoBuy]

Wesrae does this eman if the contractor cannot absorb the increase and the developer will not help out then building stops and investors can potentially lose their money or go through costly and lenghty court proceedings?Also,when do you think the increased costs will reflect in new launch prices as there are still alot of launches going at 750aed per sq ft?Will increases in launch prices push up the value of completed units?

[DAYFox]

Originally Posted by DoBuy

Wesrae does this eman if the contractor cannot absorb the increase and the developer will not help out then building stops and investors can potentially lose their money or go through costly and lenghty court proceedings?Also,when do you think the increased costs will reflect in new launch prices as there are still alot of launches going at 750aed per sq ft?Will increases in launch prices push up the value of completed units?

Of course there are still launches going for 750aed, it depends all on location, location, location! But in Business Bay there is nothing launched for 750AED...

[DoBuy]

Originally Posted by DAYFox

Of course there are still launches going for 750aed, it depends all on location, location, location! But in Business Bay there is nothing launched for 750AED...

I appreciate there are still launches going for 750 thats what I said earlier.What I was asking is when will increased construction charges start showing in launches and will this increase the value of completed properties?