Residents suffer, house price climb unrelenting

RESIDENTS SUFFER: House and rental prices in the UAE continued to skyrocket during the first half of the year. (Getty Images)

Residents in the UAE continued to suffer during the first half of 2008 due to the unrelenting climb in house and rental prices.

House prices in Abu Dhabi rocketed by 61 percent between the fourth quarter of 2007 and the second quarter of this year, while in Dubai prices jumped 37 percent over the same period, HSBC said in a report on Monday.

Rents in the UAE capital shot up 58 percent during the period, while in Dubai prices rose 22 percent, the bank said, citing research by real estate consultancy Colliers International.

HSBC said supply bottlenecks and project delivery delays, in addition to rapid population expansion, were driving prices.

It said aggressive interest rate cuts by the UAE central bank and liquidity provided by record oil prices were also fuelling asset inflation.

The bank said the average house price in the UAE capital during Q2 was $5,800 per square foot, while the average rental price was $430 per square foot.

In Dubai, the average house price was $5,420 per square foot in Q2, while the average rental price was $420 per square foot.

House and rental prices in both Abu Dhabi and Dubai continued to accelerate during the first half of the year compared to 2007, and HSBC predicted prices would continue to climb.

The bank said house prices in the UAE capital rose just 18 percent between Q4 2006 and Q4 2007, while rents increased 22 percent over the same period.

House prices in Dubai grew 17 percent over the period, while rents climbed just 8 percent.

The bank said the rent caps in Abu Dhabi and Dubai could actually be causing rental prices to accelerate even quicker as landlords were demanding higher rents to compensate for the caps.

“We believe the caps might be having a perverse effect, leading property owners to ask for higher rents that capture expectations of future appreciations today,” it said in the report.

HSBC argued that despite how much house prices and rents had shot up over the past year and a half, prices are still relatively cheap considering the growing wealth in the UAE and when compared to other major global cities.

Nominal GDP in Abu Dhabi and Dubai is expected to grow by 40 percent and 30 percent this year and GDP per capital is expected to reach $70,000 and $42,000 respectively, the bank said.

“Given the growing wealth in the UAE... we believe there is still room for further price appreciation. In fact... residential prices in Abu Dhabi and Dubai remain relatively cheap, in our view,” it said in the report.

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HSBC wants your loan
Posted by Wally, Kuwait, Kuwait on Thursday 17 July 2008 at 09:47 UAE time

People like HSBC are one of the main contributors to inflation in UAE. Providing easy loan, and speculating on great returns from real estate investment. The more load you take, the fatter their salaries will be. Wake up HSBC. Speculation on an already bubbly market will cost you dearly, especially when people no longer can afford their installments, and start defaulting on those easy loans. I am sure when this happens, you will start whining and those fat salaries will shrink.
History never disappoints, it happened before and will happen again.

MAFIA
Posted by Michael on Thursday 17 July 2008 at 08:58 UAE time


How come a three bedroom apartment on the outskirts of Abu Dhabi goes for AED 75K direct from owner, yet for AED 300K from brokers.

Run for cover!!!!
Posted by Hermito Fernandes, Sharjah, UAE on Wednesday 16 July 2008 at 20:19 UAE time

I would like to applaud those who have posted before me on this issue. I am definitely wondering where these guys /gals get their figures from and how they consider that rent increses as shown above are aqcceptable and even cheap compared to other countries, what is the basis of the comparison and then do those countries have a majority expat community that can barely survive once their rents have been paid? Do those countries have policies where their salaries do not go up as much as the inflationary pressures surrounding them? Please get realistic, please compare apples to apples.

Rents in UAE
Posted by Melwyn Pereira, Sharjah, UAE on Wednesday 16 July 2008 at 06:10 UAE time

The rent cap/rent control in the UAE is a big sham. Landlords are increasing rents without any consideration at all. I live in a 19 year old building in Rolla - Sharjah and I have been living in the same flat for the past 12 years. For the last 3 years there is absolutely no maintenance done in the building but rents have shot up from 20K to 30K to 40k and yesterday I renewed it for 45K. Considering the situation in similar buildings I felt it was worth paying 45K and staying in the same building rather than moving out. So we are at the mercies of the landlords or sharks.
Dont know from where HSBC gets their statistics but going by that I feel its a rich man's land and there is no place for the middle/lower class in the UAE.
I probably will bear for some more time and when its breaking point just leave the country - saying good bye

HSBC argument
Posted by Hombil, Muscat, Oman on Tuesday 15 July 2008 at 16:45 UAE time


What can you expect from someone working in HSBC, which pays fat salaries, allowances, club memberships etc?

Have you gone mad?
Posted by Naz Hussain on Tuesday 15 July 2008 at 13:18 UAE time

Have you gone mad? An average price of $5,420 per square foot in Dubai? That's 19,900 Dhs per square foot - more than the Burj Dubai. What is wrong with you people?

SHOW ALL COMMENTS

Residents suffer, house price climb unrelenting
Posted by Andrew, dubai on Tuesday 15 July 2008 at 12:28 UAE time

HSBC report comment on "nominal GDP growth" in AD and DXB of some 40 and 30 per cent does not necessarily reflect in pay packets - its the pay packet that goes to the rents and property prices. The comment "In fact... residential prices in Abu Dhabi and Dubai remain relatively cheap, in our view" makes me wonder if the Authors of the HSBC report had been to "Friday Brunch" when the signed off the report.

Re. HSBC argument!!!
Posted by Subhash Rajapakse, Dubai on Tuesday 15 July 2008 at 12:22 UAE time


It is better to re-check if this HSBC argument is official! Because it is very short sighted to base statements on nominal GDP. What about the inflation factor? What about income distribution? The wealth may be growing, but most probably 90% of the wealth amassed is controlled by 10% of the population! Hope HSBC does not grant personal loans based on this theory!!!

Rents
Posted by Dimple Shastri, Dubai on Tuesday 15 July 2008 at 10:46 UAE time

Rents are unjustified, and all the new buildings coming up are shabby quality with poor infrastructure. I had to move to Al Nahda because I couldn't find anything within my budget in Dubai. I moved to a brand new building in April which was reasonably priced (though still above average). We are now in June, and they have already changed the pipes in the building 3 times, when they were changing it, the pipes looked more than 15 years old, as they were rusting badly, the water tank was replaced twice probably because of the same reason, the building pluming system is below standard, and the water stinks! And when do we get to know all this? After we move in and pay the year's rent in advance.

There is obviously a lack of quality control here when it comes to construction. I love living in the UAE, but there is not enough being done to build quality accommodation, however it seems as though a lot of work is being done to short change the people who are helping the economy for this country!

rent is cheap
Posted by Jochen, Dubai, UAE on Tuesday 15 July 2008 at 09:02 UAE time


Dear Author, you seem to be one of the 1 digit expats lured here with a nice expat package, living somewhere in New Dubai Area, driving a 6gal/100km SUV. If you look at reality you would see that majority of people suffering here due to the unrealistic rent rates, you do not get what you pay for and government is not doing much to stop this. It will be an exodus of labour from UAE as people earn more money net in their pockets elsewhere.

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