Dubai property demand flat amid global slowdown

DEMAND FLAT: Asteco said sales just a fraction of what they were two months ago. (Getty Images)

Dubai residential property demand was flat in October according to broker Asteco as a global economic slowdown saw further weakening of international real estate markets.

“On the secondary market, the last week has been flat and not a lot has happened. We are getting sales but about half to three quarters of what it was two months ago,” said Andrew Chambers, managing director of Asteco.

Other agents have reported a decline in prices in some locations.

Timur Usmanov, a real estate agent for Dubai-based Monshaat Properties, said he has seen declines of up to five percent across Dubai in the last month.

"Investors are confused and they think prices will drop," Usmanov said.

The global financial crisis has hit demand from foreign investors, which make up a large percentage of property buyers in Dubai, while tightening liquidity has made home financing more difficult, agents said.

Local mortgage providers have slashed home financing from 90 percent to as little as 60 percent in recent weeks.

Recruitment consultant Ellie Rankin, who has been trying to sell her one-bedroom apartment in Dubai Marina, said she has not seen the interest she had hoped.

"[My apartment] has now been on the market for a couple of weeks... I expected more interest more quickly,” she said.

Media professional Phil Smith, who also owns a one-bedroom apartment in Dubai Marina, said his property has been on the market for over a month and that he has received only one offer that was below his asking price.

Dubai was the first UAE emirate to open up its property market to foreign investment in 2002, triggering a six-year boom. Real estate broker Colliers International said earlier this month Dubai house prices rocketed 76 percent in the year to June.

Colliers’ House Price Index for Dubai showed house price growth slowed from 42 percent in first quarter to 16 percent in the second quarter.

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READERS' COMMENTS

Troy, better to rent
Posted by brandaid, Dubai on Thursday 6 November 2008 at 14:09 UAE time

Hi Troy, my view is if you have paid most of it and it's already built then go ahead and rent it out. I know that many developers and brokerage agencies with whom I deal with have fired many staff this last week (2 of the biggest agencies have), which is not a good sign. If you had only put in 20% or so I would say that it doesn't make sense to put good money after bad. If the market drops 40% or more, then continuing to make payments doesn't make sense, as you would actually lose more by continuing to pay than you would if you backed out. Think about this though: for all the folks that just bought into new projects at very high prices and have just put in less than 30%, but expect the market to drop more than that, say 40-50% or more, why should they continue to make payments knowing that it will be a very long time before they will actually get that money back? With the Escrow laws in place, if many people stop paying, and the developers can't build the project due to lack of funds and go under, then the money in escow should technically go back to the investor, less reasonable expenses. But how this works when the developer has bought the land from the Master Developer who probably has first rights on any money owing, is anybody's guess. I guess you would get back some of your money, after the MD has taken their cut (if they are still owed money for land). Obviously this doesn't work if you bought the property from a MD directly, as the Gov't will make sure the company doesn't go under, but it makes you think about the fate of many non-Gov't backed developers.

need advice
Posted by troy, Dubai, UAE on Tuesday 4 November 2008 at 01:31 UAE time


Realto, I totally agree that these are unrealistic prices by all standards, but perhaps you need to keep in mind the wealthy locals who see more value in buying a prestigious 60 million estate in their hometown than buying in Mayfair? They spend millions to get a special car number plate and thousands for special mobile number. You never know, they might own a fancy UK home as well. Don’t underestimate the wealth in this country!!

There is a lot of sense in what many of you are saying, especially Trojan, simon and brandaid. What would you guys advice someone who has already bought property? I bought a second property recently and i see prices dropping everyday and at an alarming rate. I was taking it as a long term investment, but I’m getting really worried from what is happening now
Everyone was expecting a correction, but prices are dropping very fast, we're talking at least 40% on off plan, if not more, and 20% on ready property. That’s worst than the stock market!!! I'm really lost here, owners are now competing on who will offer the lowest price in the market. My property is ready next month and it's a golf course unit by Emaar...I was selling it below market price last month and today owners are accpeting any price you offer. I might already be in negative equity. I thought it will hold it's value because of the location, quality, developer etc... But it seems there is extreme panic in the market...what do you guys advice? Shall i follow the herd and sell amid this market panic or wait for a couple more months till the picture is a bit more clear, it’s a ready property so I hope it won’t decline any further OR should rent it out for a year (which should cover my mortgage) and see what will happen next year

What would rather buy
Posted by Realto, Dubai on Monday 3 November 2008 at 09:43 UAE time


A simple question, would you spend 65million on a 5 bed villa in the so called luxury development Barari or for the same amount a beautiful Victorian house in Mayfair London, probably one of the most luxury areas????????

this is why the dubai property market does not make sense!

House prices
Posted by Bloke on Sunday 2 November 2008 at 18:19 UAE time


It is interesting that people are very polarised on this subject, to the point where they are getting very frustrated when people have differing views. It seems that to be the person to shout "We are all doomed" the loudest wins...oh with a bit of I told you so to go with it...well, I guess we all knew there would be a correction though not many can claim to have foresaw the global meltdown we have seen though if they did they are probably wealthy now.
My view lies somewhere in the middle because of a few facts,
no-one who owns a villa or an apartment will lose any money on it unless they sell it for less than they bought it, if you live or rent your property then fine.
The renting situation in this city has not changed over night, the fundamentals were very good a few weeks ago, 7-10% per annum return though this may have dropped a bit it is still much better than the uk where it was 3-4% for years, also as noted in the uk when property prices fall no-one wants to buy as they don't know where the bottom of the market is so they rent instead.
To take a reading of the markets right now is not going to be a very good weather vane of tomorrow as we will only see where we are in a few months time, yes the market may fall, maybe considerably but Dubai will not fall in the sea, the largest market of them all, the US, is rudderless until the new president os sworn in and once the dust settles from that we will see.
If you made financial decisions based on what everyone has said and firesale everything if you can this week then you may find yourself having to pay expensive rent next week...

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