Dubai’s iconic palm island reaches low point as property prices hit three year low

Prices have fallen to their lowest level in over three years, with a three bedroom apartment on the prestigious Shoreline changing hands for just AED1.55million ($422,000).
 
It is reported to be one of a number of distressed sales that have come onto the market in the last few weeks showing that even a prestigious address does not prevent real estate owners falling on hard times.
 
Selling prices are now as low AED704 ($191) per square foot, a far cry from the more spectacular prices of over AED2300 ($626) in 2007. That means that since the start of the property crash in late 2008, prices have now fallen by nearly 70% in some parts of the Palm.
 
In May this year the Arabian Business Think Tank forecast that prices on the Palm would fall another 20% in 12 months to May 2011.
 
As if this wasn’t enough bad news, nearly all 10 planned hotel properties on the Palm archipelago have seen setbacks due to the global economic downturn. Fairmount Hotels & Resorts, Rixos Hotels, Kempinski, Movenpick Hotels & Resorts and Sofitel have all pushed back their launch dates by an average of two years when compared to initial opening dates, according PricewaterhouseCoopers advisory partner Mohammad Dahmash.
 
The hardest hit Palm Jumeirah project, however, is the equally iconic US$600 million Trump International Tower. Not only has the work stopped but the site has been levelled with no re-start date given.
 
According to Jamie Wilson of EPG Hotels & Resorts, Kempinski’s development partner, everyone is more cautious. ‘Naturally with the world economy we have been cautious with the development of the hotel and residences. The global economic climate has made our suppliers much more competitive, as well as raising the bar on quality and deadlines,’ he explained.
 
For now, Kempinski plans on opening the Palm Jumeirah hotel division in October 2010. This will be the second hotel in Dubai for Kempinski. Their first, located in the Mall of the Emirates, was completed in 2006.
 
Mövenpick, one of the most ambitious hoteliers in the UAE, admitted construction delays have pushed back the opening date of their Palm Jumeirah Royal Amwaj property. ‘We did experience some delays in the construction of the properties on Palm Jumeirah, similar to most other developments. The recent downturn did slow down the progress. However, the hotels are going ahead and construction is advancing very well now,’ said Andreas Mattmuller, senior vice president for the hotel’s Middle East and Asia division.
 
The hotelier has plans to open 21 hotels in the Middle East, with a total of 17 in the next three years. Although most of these ventures were conceived during the boom, Mattmuller feels optimistic about Mövenpick’s concentrated investment both in the region, and more specifically in Dubai.
 
‘Although average rates have declined during the recent economic downturn, occupancy levels have been consistently high and we are very positive, if not bullish, for the long term future here in Dubai,’ he explained.