Dubai developers are dusting off plans for long-dormant projects as demand for luxury property surges from a wave of wealthy new arrivals to the Gulf city-state.
State and government-related real estate firms are looking to restart projects that failed in the wake of the city’s debt crunch during the global financial crisis. These include the mothballed man-made Palm Jebel Ali island and the stunted towers of Dubai Pearl, a long-delayed development at the entrance to another famous reclaimed island, Palm Jumeirah.
These developments have long acted as visible reminders of past excesses but are now reviving thanks to a wave of new entrants to the city, from Asian billionaires and cryptocurrency investors to wealthy Russians looking to escape sanctions imposed after the invasion of Ukraine.
Dubai-based property consultants Mira Estate said sales to customers from Russia and the former Soviet states had doubled so far this year, compared to the same period in 2021.
“Billionaires and entrepreneurs have been flocking to the UAE in record numbers, leading to a surge in demand for real estate,” said Tamara Getigezheva, Mira’s chief executive. “Most homebuyers are looking for ready units and waterfront properties.”
The volume of transactions in Dubai’s residential market soared by a third in June 2022 compared to a year before. In the year to June, transactions reached their highest total recorded since the peak in 2009, according to real estate group CBRE.
“Off-plan” sales — of properties that have not been built yet — rose 47 per cent and ready homes by a quarter in the period. Prices increased by 10 per cent in the year to June, while average villa prices were up 19 per cent.
Villas on Palm Jumeirah, the reclaimed island beloved by the city’s wealthy, recorded the highest average sales rate in the city, according to CBRE.
It was developed by Nakheel, the government-owned firm that was at the heart of Dubai’s financial crisis in 2009 when it nearly defaulted on some of its debt.
Demand for waterfront properties is providing a renaissance for the company, which was previously controlled by state conglomerate Dubai World and now falls under the emirate’s sovereign wealth fund, the Investment Corporation of Dubai.
Palm Jebel Ali, which is three times larger than Palm Jumeirah, was put on hold in the aftermath of the 2009 crisis.
Nakheel’s new management, once it receives government approval, is expected to launch developments on the island to meet demand for beachfront real estate, said three people briefed on the plans.
Over the past few months, Nakheel has been contacting existing investors in the project and offering to buy back their contracts for plots and properties, said six people briefed on the offers. The company declined to comment.
Investors are being offered financial recompense or credit notes for other Nakheel properties, said three of these people.
Customers will also be given the opportunity to reinvest their cash in the revived Palm Jebel Ali, they added. In such cases, the company would provide partial compensation as prices on the island are expected to be much higher than for the original project launched two decades ago.
“I bought at a discount, but I don’t want to sell — I want the villa I bought,” said one Dubai businessman. Others who bought at a premium are facing poor recoveries on their investments if they sell back at the original selling price.
During its pre-crisis heyday, Nakheel also started developing an even larger man-made coastal project, Palm Deira, which was never fully reclaimed and was then rebranded Deira Islands.
Located off the city’s old town near the creek, the company is planning an array of commercial, residential and hospitality projects across the four islands, soon to be relaunched as Dubai Islands.
Another long-abandoned project set for a revival is Dubai Pearl, whose semi-complete structures have been a blot on the skyline for 18 years.
Construction work on the development of four towers connected on the top floor by a “sky palace” started in 2004 before faltering, leaving investors out of pocket.
The government recently cancelled the project and put it out to auction among various UAE-based bidders, said four people briefed on the move.
Dubai Holding, the conglomerate owned by the ruler Sheikh Mohammed bin Rashid al-Maktoum, won the auction, thereby taking back the land it sold to the original developer in the early 2000s. Investors are now expected to get a quarter to a third of their money back.
Dubai Holding did not respond to a request for comment.
The deal, if it completes, should provide some closure to thousands of investors who have been battling for recompense for years.
“Getting 25 per cent of my cash back after a 15-year wait isn’t exactly great,” said one. “It’s been a tough way to learn that contracts in Dubai are rarely worth the paper they’re written on. On the other hand, it’s still better than nothing.”