Construction market ‘showing signs of recovery’

August 19, 2014 6:13 pm

UAE real estate projects planned in 2014 are set to be valued at $315 billion, with $212bn worth of projects already under construction as of May, according to consultancy firm EC Harris.

Following the property crash of 2009, the years of recovery which followed were defined by a moderate increase across the sector. However, as Christopher Seymour, Partner and Head of Property and Social Infrastructure at EC Harris says: “The market is finally showing real signs of recovery and prospective growth suggesting that the construction market will remain strong this year.”

Indeed, assessment of the UAE’s largest developers’ performance in H1 2014 indicates that years of consolidation are truly over, and the attention has once more turned to robust growth. Dubai-based Nakheel, Emaar and Damac announced H1 net profit increases of 54, 41 and 39 per cent respectively.

Moreover, focus on infrastructure has also surged this year as the UAE has pledged in excess of $15bn towards developing its roads and rail network; a five-fold increase on 2013.

However, as investors and companies have learnt from past experiences, a surge in growth can have dire consequences, and the performance of Dubai’s construction giant Arabtec this year epitomised this danger.

At the beginning of the year Arabtec announced several highly lucrative megaprojects, including a $40bn deal to build one million homes in Egypt. With their shares quadrupling over 15 months, reaching a record high of AED9.88 per share in May, boom turned to bust overnight, with the company losing half of its market value within days, eventually falling to a low of AED1.93 by late June.

As the largest listed firm on Dubai’s Financial Market, the saga expectedly dragged the entire real estate sector into demise throughout June.

As such, while increased cash flows indicate the construction market is well on its route to recovery, rapid growth can also be a sign of a highly volatile market – a label the UAE has never really managed to shrug off.