Property prices on Palm Jebel Ali fall by up to 40%

PALM PRICES: Investors in off-plan properties on the Palm Jebel Ali have been forced to reduce prices to find a buyer, agents say.

House prices on the Palm Jebel Ali, second largest of Nakheel’s palm-shaped islands, have fallen by as much as 40 percent in the last two months as the global financial crisis sees foreign investors move to liquidate assets in Dubai, according to three Dubai-based real estate agents.

“I never expected [prices on the Palm Jebel Ali] would have come back so quickly and by so much,” said Jeroen Van Der Geer, partner at AA Properties in Dubai. “We are back to a level of one and a half to two years ago.”

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.

The price of five and six bedroom signature villas, the most expensive properties on Palm Jebel Ali, have dropped from around 16 million dirhams ($4.35 million) to 9 million dirhams since the beginning of September, according to figures from AA Properties.

But that still represents a premium of between 70 percent to 80 percent on the original launch prices.

A four-bed garden home has fallen from around 7.4 million dirhams to 4.1 million dirhams, according to the figures, with the premium dropping from around 160 percent to 45 percent.

The figures show a three-bed water home, the cheaper of the Palm Jebel Ali properties, is now selling for around 3.8 million dirhams, when at the beginning of September it was selling for 6.2 million dirhams, with the premium falling from about 210 percent to 90 percent.

Jodie Smith, managing director of Elysian Real Estate, said garden homes were currently selling at around 4.5 million dirhams, compared to 8.6 million at the beginning of September, while water homes had come down to around 4 million dirhams from 6.5 million dirhams.

David Rowland, sales consultant at Dubai’s Smith & Ken Real Estate, said he had seen premiums on signature villas drop from 200-210 percent in July/August to 75-80 percent currently.

Rowland said he had also seen garden homes selling at a 35-40 percent premium, compared to 130-160 percent in July/August.

He described the drop as “quite alarming”.

Rowland said sales had not completely dried up on the Palm Jebel Ali, but investors were having to accept premiums of around 35-40 percent to make a sale.

Rowland said premiums could go as low as 20 percent before property prices rebound.

“I think we will see a rebound. Palm Jebel Ali may go down to as low as 20 percent [premium]. When it does we will see people start to come back to the market, maybe in December,” he said.

Van Der Geer said he expected demand for properties on Palm Jebel Ali return before Christmas as global financial markets stabilise and investor confidence begins to return.

“It is a good opportunity for investors now and I believe the [long-term] picture is good. Prices will go back up,” he said.

Smith said she had already seen sales pick up this week, with investors taking advantage of bargain prices to snap up properties that just a few months ago were out of their price range.

Nakheel said in a statement that it welcomed “all proposals and discussions by all industry-related partners aimed at maintaining a healthy market movement under the current circumstances”.

“Nakheel realises that it does not work in isolation and has a great number of partners and third parties whose interests are intertwined with its own. This approach is a very responsible approach in line with current global economic conditions,” the developer said.

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READERS' COMMENTS

Welcome to the Dubai nightmare
Posted by michael, Dubai on Sunday 9 November 2008 at 15:23 UAE time

Five years into the making, we finally see this massive buble burst. After stalling a few years after the first DFM stock crash in 2005/2006, Dubai real estate is going to get what it deserves. A speculators' dream has come to an end and as the big guys liquidate, the end-user investors will take the beating... Same happened in the stock market in '05-'06, the speculators ran and the little guys got hit!

The Dubai real estate market and Dubai as a whole has been marketed as a "sure thing" a "dream"! I am absolutely sick of all the propaganda/pr in the UAE newspapers regarding the strength of the real estate market and Dubai as a whole. "Expert" PR articles written by real estate agencies send shivers up my spine as do the recent declarations by some developers that the Dubai real estate market will never fall! The real estate market has what's coming to it as it was build on greed and no regulations... many will soon realise that they had bought into a nightmare rather than a dream.

The downward pressure is YET to come ...
Posted by Moazzam, Lahore, Pakistan on Friday 7 November 2008 at 19:30 UAE time

The Dubai market fundamentals are firmly anchored into globalisation. Even without the global recession, the property market for new starts was down to single digit growth. Now with the recession, there's no escaping gravity! First the real estate stocks have been hit - Emaar is 60% down and Amlak and Tamweer have announced merger.

A slowing domestic economy will lower rental yields and by extension, property prices - Morgan Stanley predicts 10% as early as 2010. And if this trend persists, cumulative decline by 2012 could be over 30%.

On the demand side, this is primarily driven by Iranians, Pakistanis and former Soviet states. These states are in a crunch - Ukraine and Pakistan have reached out to the IMF and Iran hit by tumbling oil price. A crunch here so there is every reason to believe the demand will further slow down.

I dont think so!!
Posted by SR on Friday 7 November 2008 at 13:20 UAE time


All this while these property chiefs insisted that real estate market is not affected, it is still at growth stage, hence prices will continue to soar, demand is outstripping supply etc. etc. etc.
Finally, they admit that prices in an iconic development has dropped by 40% over the last 02 months, but the best part is that it will pick-up in December!!!
Well, I dont think so, if the drop is this sharp, it will fall further over the next 06 months, simply because global economic indicators are not going to be any better. This I guess is an economic reality that some guys predicted on this forum over the last 06 months or so!
Finally, they have also accepted that Dubai can not operate in a vaccum, they are part and parcel of the global economy!
The chances are that real estate prices will fall and continue to fall and remain flat until the global economy recovers, which might take another 02 years.
I guess it would be worthwhile if Developers / Real Estate Brokers look at contingency plans rather than launching new projects! Welcome back to the real world!

Palmed down....
Posted by Obelix, Dubai, UAE on Thursday 6 November 2008 at 15:00 UAE time


The plot thickens as they say. Upto 40% down in two months and yet experts quoted here say they will rebound in December which is 3 weeks away. Hmmmm , interesting.

At this rate, I think I'll take a dozen. Now, where is that cheque book.

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