A tightening credit market and restrictions on buying offplan property have prompted several major developers to consider moving their offerings downmarket. The move signals a change from targeting the luxury market - a strategy used by the bulk of UAE developers since the start of the region's property boom five years ago - to constructing developments aimed at the middle segment of the market.
Abu Dhabi's Al Qudra Holding is among the first developers to readjust its project portfolio as access to credit becomes tighter and more expensive for homebuyers. In the light of changing market conditions since the turn of this year, the company altered the design of its Ain Al Fayda community development in Al Ain to cater towards the sale of property to mid-range buyers. Al Qudra launched the project for sale at last week's Cityscape Dubai.
"We were targeting the high-end market at the beginning of the year, but saw the markets and the way they were turning towards the first quarter of this year," said Mahmood Ebraheem al Mahmood, the chief executive of Abu Dhabi-based Al Qudra. "So we decided to redefine it as more of a mid-range [project]. We will now focus on this part of the market and see how it develops." Mr Mahmood added that a similar strategy was likely to be applied to some of Al Qudra's future projects.
"Many people are complaining that credit is too expensive," he said. "So we have adjusted our portfolio to not only focus on high-end, but also on the middle segment of the market. But we haven't abandoned high-end, we've just reduced the allocation of investments to that segment." Mr Mahmood said that the mid-range market provided the company with "a lot of end-users". Other developers who once only sold to high-end users are also planning to adopt a similar strategy to Al Qudra in a bid to weather the liquidity slowdown.
"The market is moving towards that direction," said Mohammed Sultan al Qadi, the chief executive of RAK Properties. "Our projects that have not yet been completed are targeting the high-end segment. But for new projects, targeting the middle income and affordable market will be the trend from now on. And for sure, we will be part of this trend. The whole world has changed and we have to change with it."
While developers adjust their strategies to accommodate current market conditions, experts predict that the global financial crisis could lead to a cooling down of the frenzied speculative offplan buying that has principally been responsible for fuelling local property prices. According to Chris Dommett, the chief executive of the mortgage adviser John Charcol Dubai, both foreign and local investors are being more cautious than usual, and the active offplan market is likely to slow down.
"Investors who buy up property and quickly resell for a profit, otherwise known as 'flipping', have not only been discouraged by the global economic uncertainty, but by recent government action taken to limit the practice," said Mr Dommett. A report published yesterday by EFG Hermes in the aftermath of Dubai's Cityscape also revealed signs of a cooling market. The report said that the overall atmosphere at the property show was not as frenzied as in previous years, with investors adopting "wait and watch mentality".
ngillet@thenational.ae