A leading Dubai property developer has called for a temporary end to new construction in the emirate in a bid to address over-supply issued, Arabian Business reported.
Around 30,000 new homes will be built this year in Dubai, twice the demand in the Gulf city, according to estimates by property broker JLL.
It comes as property prices continue to fall by around 30 percent compared it their peak five years ago.
That has led to Damac Properties chairman Hussain Sajwani to call for immediate action.
In an interview with Bloomberg, he said: “All we need is just to freeze the supply. Reduce it for a year, maybe 18 months, maybe two years.”
Damac has dramatically reduced new sales in the past two years and will focus on selling the properties in its inventory, Sajwani said. Still, the developer will complete 4,000 homes this year and another 6,000 in 2020.
Sajwani warned that ignoring the oversupply could spell trouble for the city’s banks. The declining value of homes would inevitably lead to growing bad loans and higher provisions against default, hitting profitability. Dubai has recently created a committee to limit supply and ensure that private developers operate in fair environment.
“The domino effect is ridiculous because Dubai’s economy relies on property heavily,” he said.
Damac’s share price has fallen 40 percent this year and the company won’t pay dividend because profitability is down. Sajwani said he prefers to keep the cash in the company to meet financial obligations.
Earlier this year, Dubai's ruler announced the creation of a panel to address the glut in the property market.
The committee charged with rebalancing the industry is headed by Sheikh Mohammed bin Rashid Al-Maktoum's son and deputy, Maktoum bin Mohammed, and includes representatives of top property developers in Dubai.
Standard and Poor's ratings agency said earlier this year that property prices in Dubai, where full foreign ownership is allowed, have slumped to levels close to those seen in the 2009-2010 crash.