DUBAI (Reuters) - Heart of Europe, a cluster of luxury homes on six islands off the coast of Dubai, will be ready when the city hosts the World Expo in 2020, says its developer, but concern remains about over-supply and falling prices in the local property market.
Resembling European destinations like Germany, Venice, Sweden, Switzerland and St. Petersburg, the project is part of The World, 300 man-made islands shaped like a map of the world.
The World project — costing $20 million to $50 million for each island — captured global attention when it was completed in 2008, at the height of Dubai’s property boom. Now, it’s a symbol of excess as the emirate grapples with a sluggish market.
Kleindienst Group is turning the Heart of Europe islands into an holiday destination with a European feel. Climate- controlled streets promise rain and a snow plaza four kilometres (2.4 miles) off the coast of the desert city.
It aims to complete the project by the time Dubai hosts Expo 2020, a world fair that Dubai hopes will attract 25 million visitors.
“Our offering is aimed at the second-home target audience and we are confident that Expo 2020 will add value to our proposition,” said Josef Kleindienst, chairman of the privately-owned Kleindienst
The development has sold 1,000 out of 4,000 units, with villas and palaces priced from $16 million to $100 million each, Kleindienst said. The whole project is valued at $5 billion.
But property prices in the emirate may decline 10 to 15 percent over the next two years, S&P Global Ratings said earlier this year. Analysts say excess supply is one reasons, as developers rush to complete projects in time for the Expo.
The Expo is likely to cause spikes in the real estate and hospitality market, said Manika Dhama, associate partner at real estate consultancy firm Cavendish Maxwell. It remains to be seen whether they will be sustainable.
Kleindienst said he was not concerned about the state of Dubai’s real estate and hospitality markets. The project offers “strong capital appreciation and rental yields that make the second-home market a compelling investment opportunity for investors,” he said.
Reporting by Tuqa Khalid and Jacob Greaves in Dubai; editing by Tom Arnold, Larry King