Worlds Biggest Shopping Mall Announced in Dubai – Just as Property prices are Falling

Dubai – with its usual commensurate timing of announcing the ‘worlds biggest’ releasing a torrent of floorspace on the market, just at the same time as property professionals are telling me we have now reached the peak of the cycle.  (the Q2 reports are about to be made pubic).  This can and will only end in tears.  I don’t know what the inspiration for the design was – watching Blade Runner and playing too much Bioshock 2 maybe.  A back of the envelopeclaculation shows that a 27 lane freeway is needed to serve the development at least (retail alone, let alone the hotels, residential offices etc.), the road it is on has 16, and a Metro with no spare capacity, let alone capacity for anything else.   This is not even the only development of similar scale planned along this corridor. There are several.   It simply doesn’t work and there is no strategy to make it work as the current plan for Dubai only runs to 2020 and simply proposes building out the backlog from the last recession.

Mall of the World
(Facts & figures)

> Location: Shaikh Zayed Road

> Total area: 48 million sqft

> Hotel rooms: 20,000

> Expected visitors: 180 million annually

> Celebration centre: 15,000 revellers

> Wellness district: 3million sqft

Khaleej Times

Dubai will don yet another jewel in its crown when the world’s first temperature-controlled city, Mall of the World, comes up along Shaikh Zayed Road.

Occupying a total area of 48 million square feet, the project launched on Saturday by His Highness Shaikh Mohammed bin Rashid Al Maktoum Vice-President and Prime Minister of the UAE and Ruler of Dubai, will comprise the largest indoor theme park in the world, which will be covered by a glass dome that will open during the winter months.

The project will also house the largest shopping mall in the world with an area of eight million square feet, which will take the form of an extended retail street network, different to the typical shopping mall concept currently available in Dubai. Additional districts within the project will include a wellness zone catering to medical tourists, a cultural celebration district as well as a wide range of hospitality options comprising 20,000 hotel rooms catering to all types of tourists.

Once completed, the City is projected to become a year-round destination, welcoming around 180 million visitors annually. “The growth in family and retail tourism underpins the need to enhance Dubai’s tourism infrastructure as soon as possible. This project complements our plans to transform Dubai into a cultural, tourist and economic hub for the two billion people living in the region around us; and we are determined to achieve our vision,” Shaikh Mohammed said.

In the presence of Mohammed Abdullah Al Gergawi, Minister for Cabinet Affairs and Chairman of Dubai Holding; Ahmad bin Byat, Chief Executive Officer of Dubai Holding; and Khalifa Saeed Sulaiman, Director-General of the Protocol Department, Shaikh Mohammed confirmed the need to work towards achieving Dubai’s ambitious tourism vision.

The new project, developed by Dubai Holding, will introduce an innovative concept of an integrated pedestrian city connected to the mall and offering a wide range of leisure, retail, cultural, wellness, recreation and hospitality options under one roof.“Our ambitions are higher than having seasonal tourism. Tourism is the key driver of our economy and we aim to make the UAE an attractive destination all year long. This is why we will start working on providing pleasant temperature-controlled environments during the summer months. We are confident of our economy’s strength, optimistic about our country’s future and we continue to broaden our vision,” added Shaikh Mohammed.

Tourists will be able to enjoy a week-long stay without the need to leave the city or use a car. The 7km long promenades connecting all facilities will be covered during the summer and open during the winter, ensuring pleasant temperatures throughout the year.

The project will see the addition of 100 hotels and serviced apartments buildings, including 20,000 hotel rooms, to Dubai’s hospitality sector. The project will include designated parking areas with a capacity to host up to 50,000 cars on the ground level.

Dubai Cultural District will be the hub for national and multinational cultural festivities and events in the UAE. A dedicated theatre district with host of venues similar to some of the world’s most renowned landmarks such as London’s West End and New York’s Broadway. The Celebration Walk, similar to the Ramblas Street in Barcelona will connect the cultural district to the rest of the Mall. Dubai Cultural District will include a range of conference, wedding and celebration halls with a capacity to host thousands of revellers, befitting the multicultural social fabric of Dubai.
“Mall of the World presents an innovative concept in the international hospitality sector, further strengthening Dubai’s appeal as a tourism hub with a wide range of options,” Al Gergawi said.Another component of Mall of the World is the Wellness District, which will cover a total area of three million square feet, dedicated to providing wellness and rejuvenation services. It will offer a holistic experience to medical tourists and their families, ensuring access to quality healthcare, specialised surgical procedures and cosmetic treatments, wellness facilities and high-end hospitality options.

“This project is a product of extensive research studying international and regional tourists’ requirements and preferences. The objective is to create an integrated city with a plethora of best-in-class options within pleasant environments. The project will be developed in phases in alignment with the gradual growth of family tourism in Dubai,” he added.

“We are ready to move forward with this unique concept, whose distinctive offering and strategic location will play an instrumental role in advancing the growth of Dubai’s tourism sector,” said Bin Byat.

“The project will follow the green and environmentally friendly guidelines of the Smart Dubai model. It will be built using state-of-the-art technology to reduce energy consumption and carbon footprint, ensuring high levels of environmental sustainability and operational efficiency,” he said.

 

 

It’s too Late to Build Our Way Out of A Bubble – So Why Panic and Allow Sprawl Everywhere?

The narrative of the IMF, EU, and now every political party apart from UKIP now seems to be build, build, build, relax planning, quick, quick or we will have another house price boom and bust and associated financial crisis.

One of the great economic nostrums is ‘never reason from a price’ because prices are due to both movements in supply and demand.  So to suggest that a high price requires greater supply is only half the story, it misses out whether the greater distortion is due to excess demand fueled by foreign capital and unsustainable credit growth based on property speculation.  Certainly in the long term greater supply helps, however if you are close to the top of an asset speculation cycle greater supply can simply fuel greater capital inflows and credit growth fueling the bubble to ever greater heights, and increasing the height from which the market must fall, the hurt caused when it does fall, and potentially hastening the point at which a hard landing occurs rather than from which a soft landing is possible.

I will give an example from a market much more ‘flexible’ in its release of land etc.  Dubai, where in Q1 2014 houses prices rose a record 21% and the stock of homes advertised for sale also reached record levels.  So what was the lesson from the price alone, more land releases, more consents, more completions needed because ‘market signals’ were telling you to build more.  In fact by trying to reason only from a price, from not considering inventories and unsold stock, not considering credit flow and capital inflows, and not considering whether house prices reflected real yields they were reasoning from only 1 5th of the full market signals necessary to guide public policy.

So for those who chant such simplistic nostrums learned only from the bad economics taught at Oxbridge PPE courses don’t listen to them they are charlatans.  They are the same voices that politicians listened to in Ireland and Spain calling for ever more bad release of land in poor and unsustainable locations, and look what happened as the village housing now lies half built and stripped bare by vandals, the same voices who said the markets in China, Australia, Canada and France will keep rising forever because they missed the last property crash, only now to face some of the largest property crashes in history, despite much easier supply than in the UK, as the housing market is much more flexible to changes in credit than it is to changes in supply, the latter only adding to stock by 2-3% a year when the amount of credit increasing in a year for housing can be 10 times that.

Increasing supply is needed but as a measure it has a lag of in some cases decades (for the largest sites), so there is time to get it right, develop plans and increase housing in the best locations, and more importantly turn on the levers of supply (and finance especially counter cyclical government finance) when it  will do good and least harm, let alone fuel the peak of a bubble.  The UK Government is panicking because of low housebuilding levels and because of a dogma against public spending reaches for the neo-liberal measure of allowing sprawl, a measure which has led to a housing and economic disaster in every country and at every time where it has been tried.

Don’t believe me, read this 793 page book chronicling 2 centuries of housing bubbles in Australia in painful detail by Egan and Soos

One of the most popular and influential ideas to emerge in recent years is that poor government regulation has restricted the supply of land in the form of planning, zoning and development regulations, thus hindering the timely construction of dwellings. By appealing to basic economic principles, this ‘supply constraint’ is reasoned to have increased housing prices…The purported central role of restrictive land use regulations in causing housing price inflation requires critical examination. Two distinct versions of the urban containment theory need to be considered: in the basic version, these policies restrict supply, causing a structural, upwards shift in housing prices (the ‘static-supply’ theory).This argument says nothing about the volatility of the asset price cycle. In the second, more subtle version, urban containment policies are hypothesised to delay new housing supply, exacerbating housing price volatility (the ‘cycle-supply’ theory). According to the latter variant, the rise and fall in land and housing prices during a real estate cycle are amplified. Adherents claim it is possible to out-build a bubble by increasing the supply of new housing on the urban fringe, as liberal land markets ensures a rapid supply response to escalating demand during a credit boom. Proponents claim a responsive supply of housing minimises or prevents the formation of bubbles in the land market, as the opportunity for reaping extraordinary capital gains is muted. Fortunately, the claim that supply-side factors are a fundamental driver of land market bubbles can be tested. Two conditions must be fulfilled to confirm this hypothesis: firstly, the history of the land market should not show the formation of bubbles without urban containment policies. A rich documentary record exists to test this condition. Secondly, the supply of available properties in the rental market must also be obstructed, driving up residential rents in the process….In recent decades, large bubbles have also formed in a number of housing markets considered to have liberal land use policies.

The historical record for countries with long-term real estate data – Australia, England, the Netherlands and the US – demonstrates repeated land market cycles for centuries prior to the onset of planning, zoning and development regulations implemented in the early 20th century and more extensively in the post-WW2 period. Australia’s own economic history appears to falsify the urban containment hypothesis given the formation of land market bubbles in the 1830s, 1880s and the 1920s; long before government bureaucrats made red tape into an art form during the modern era…. If the urban containment hypothesis were valid, then land bubbles in the mid-1970s and late 1980s should have been larger than those previously experienced due to additional urban containment policies and a lower rate of dwelling construction, but this is not supported by the available data.

[they quote Fred Harrisson]

But for a clinching argument, we can return to the UK. In the 150 years before 1947, the housing and land markets featured prominently in the booms and busts of the business cycle. To what do we attribute those previous episodes? We certainly cannot blame planners! In terms of price volatility and supply falling short of demand, the patterns were consistent throughout two centuries. Land planning did
not mitigate – but nor did it exacerbate – the dynamics of booms and busts…

A study by economist Dirk Bezemer tabulated the number of economists who correctly identified the US housing bubble and predicted the subsequent GFC. Among this select group, a consensus emerged that debt-financed speculation was the major cause of the bubble, with some mention of insufficient land taxation. Not a single economist considered urban containment policies to be a factor. The three experts in the historical analysis of real estate cycles – Phillip Anderson, Fred Harrison and Fred Foldvary – do not mention urban containment policies as a cause of land bubbles, past or present….

Private debt and property taxes are a glaring omission from land use policy studies, demonstrating more research is required before urban containment policies can be claimed to cause or amplify land market bubbles. General equilibrium models are incapable of controlling for the effects of mortgage debt acceleration on land prices and many studies have not controlled for the effects of property and land taxes. Adherents of the urban containment hypothesis have conveniently ignored the fact that rents tracked just above the rate of inflation across major US cities during the formation of the land bubble. The reason is obvious: if urban containment policies amplified bubbles, then rents should have increased significantly in those housing markets that were allegedly supply-constrained….

It is difficult, if not impossible, to prove causation between urban containment policies and rising land prices without a commensurate increase in rents. Recent empirical studies confuse correlation with causation, as equilibrium models cannot control for the effects of mortgage debt acceleration or the behavioral psychology of irrational agents. Once a land bubble has formed, it becomes challenging to disentangle the influence that urban containment policies have on land prices from these confounding factors. It is already difficult to accurately measure the multiple costs and benefits resulting from government regulation of planning, zoning and development. No study has yet isolated the impact of urban containment policies from other factors, such as private debt, taxation and psychology.

 

DCLG Select Committee to Investigate Joint Plan Making In Glocestershire

SW Business

A powerful committee of MPs will grill council leaders and campaigners on Monday to find out what they think of the Government’s controversial planning bible.

A Commons select committee will meet in Cheltenham’s Municipal Offices to hear evidence of the impact the National Planning Policy Framework (NPPF) has had “on the ground”.

The NPPF was designed to cut red tape and promote growth by making planning rules simpler but critics have labelled the document a ‘developers’ charter’.

The MPs have chosen Gloucestershire for their fourth public hearing because of the way in which Cheltenham, Tewkesbury and Gloucester councils have worked together to come up with a major development blueprint known as the joint core strategy (JCS).

The JCS sets out where more than 30,000 homes will be built between 2011 and 2031.

The leader of Tewkesbury Borough Council, Councillor Robert Vines, is one of six people due to give evidence.

He said: “It looks likely that we will be asked how we have managed to produce a joint plan in light of the difficulties that many areas have faced with the new National Planning Policy Framework.

“Not only have we worked through political differences, but we’ve produced what we consider to be a sound plan that will appropriately guide development until 2031.

“It hasn’t been an easy journey and we will raise the issues we have come across collectively that highlight limitations of the NPPF and the guidance, especially around issues of greenbelt and defining the housing need for our areas.”

Councillor Steve Jordan, leader of Cheltenham Borough Council, and Councillor Gerald Dee, from Gloucester City Council, will also be asked questions along with three representatives of local campaign groups.

Ian Bickerton, the chairman of Leckhampton Green Land Action Group (Leglag), will be giving evidence to the committee on behalf of Cheltenham Alliance.

He doesn’t think there are any problems with the NPPF but there is a problem with the way in which it is being implemented.

He said: “The document has been kept quite small for the purpose of allowing the public to engage. It has been simplified and the thousands of pages have gone and that is a good thing.

“But the planning inspectorate needs to make sure best practice for calculating the objectively assessed need for housing is clear. At the moment every council is just doing its own thing.”

The public hearing will start at 4pm.

South Staffs ‘We are not cooperating’ Duty to Cooperate Statements

Thanks to John Price –

South Staffs and Birmingham

The DTC statement includes a red ink comment saying ‘we strongly disagree’.

And

South Staffs and Telford and Wrekin 

With Telford and Wrekin saying, are you going to meet part of Brum’s need.

One has to sympathese with many of the methodology points made by South Staffs, however without a structure stretching outside the housing market area it is difficult to know how this ever can be resolved.

Councillor R.J.Cope by the way in his call in statement confuses very special and exceptional circumstances, his attention should be drawn to the very recent BANES inspectors report.

 

Parties Squabble Over Credit for Northern Powerhouse

Telegraph  No Credit to the EU who will fund it.

Lord Heseltine argues that it is wrong to criticise Mr Osborne for having lacked a plan for growth. “There is a plan,” he writes. “It is to restore to the powerhouses of Liverpool, Manchester, Sheffield, Leeds, Hull and their neighbouring communities the initiative that made them.”

Senior Tories and Lib Dems are already jostling to claim credit for the regional growth policy. Nick Clegg, the Deputy Prime Minister, outlined plans last week for a new economic hub in the North to rival Frankfurt or Lyon.

George Osborne, the Chancellor, also raised the prospect of turning England’s great northern cities into powerhouses for the economy with a new high speed rail route.

On Tuesday, a group of at least eight backbench Tory MPs will try to hijack Mr Clegg’s Deputy Prime Minister’s question time in the Commons to talk about how the investment is benefiting their constituents.

The policy of handing billions of pounds to local groups is intended to create hundreds of thousands of new jobs in Labour’s traditional northern heartlands.

Ed Miliband, the Labour leader, has sought to replicate the local growth plan, with his own proposals for a radical devolution of power from Whitehall to town halls across England.

In his (Sunday Telegraph) article, Lord Heseltine suggests a new transport network may be needed with fast links between Hull on the east coast and Liverpool across the Pennines on the west. But he insists that such initiatives should be devised locally, rather than by politicians in Westminster.