Dubai house prices set to drop in Q4

MARKET SLUMP: Dubai house prices will drop into the red in the fourth quarter, Colliers said. (Getty Images)

Property prices across Dubai are likely to fall in the fourth quarter as the real estate slump accelerates, Colliers International warned on Wednesday in its quarterly housing report.

House price growth slowed to five percent from July to September, down from 16 percent in the second quarter, said Colliers, one of Britain’s largest real estate consultants.

"Over the past three quarters the rate of growth has slowed to the point where we expect overall price growth to enter negative territory in the fourth quarter," Ian Albert, regional director at Colliers, said in a statement.

Colliers said year-on-year house prices were up 80 percent in the third quarter.

Investor demand has been hit by the global financial crisis and tighter lending conditions across the UAE.

The report comes three weeks after an HSBC report said property prices in Dubai fell four percent between September and October, with the price of villas tumbling 19 percent.

Buyers have found it increasingly hard to get mortgages in the last few months with banks across the region tightening their lending criteria due to the regional liquidity crisis.

Arabian Business revealed last month British bank Lloyds TSB had stopped offering home loans to people wanting to buy apartments in the UAE and that it had dropped its loan to value ratio on villas to 50 percent, meaning buyers can only borrow half the value of the property.

Two weeks ago, the country’s biggest mortgage lender by market value, Amlak Finance, suspended home loans to new customers.

Anecdotal evidence from agents points to sharper house price falls than official figures suggest.

Brokers say property prices on Dubai's Palm islands have dived in some cases by as much as 40 percent since September.

The off-plan property market has been particularly badly hit with developers relaxing payment plans to kick start the market.

“It is clear to us that the landscape has changed since the end of September," Albert said.

"The deceleration in the rate of growth seen in the first three quarters is attributable to the demand-supply dynamic of Dubai, but since the end of September a new factor, namely a shortage in liquidity caused by the international financial crisis, has impacted the market."

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READERS' COMMENTS

It's Q3 prices
Posted by Saad (Colliers Employee), Dubai, U.A.E on Thursday 4 December 2008 at 17:55 UAE time


Hi Everyone. I'm responsible for producing Colliers HPI and after reading your comments about my report I wish to clarify few things. The report covers Q3 2008. Q3 includes July, August and September of this year. At that time prices were not declining or what so ever. prices started to decline after cityscape which ended in October, therefore our figures are correct at the time. The second point I would like to clarify is that this is not a research. The numbers we use in our report come from mortgage providers in Dubai, therefore these are real, actual sale prices on properties being sold. unlike other research, this is not asking prices. It's also worth mentioning that the data or only available to Colliers not to any other firm. Again, this report cover Q3 prices not Q4.

Fall in Dubai property prices
Posted by Potential Resident, London, United Kingdom on Thursday 4 December 2008 at 16:36 UAE time


The UK market has fallen between 10% (Land Registry figures) and 16% (Hilifax B.S.) in the past 12 months.

I expect to see a much steeper fall in Dubai property prices, over the coming months, simply because they were being traded as investment products, far more so than family homes.

Generally, the faster a commodity rises in value, the faster it falls in times of uncertainty.

I am considering relocating from the UK to the UAE and will certainly stick to the rental market for the next twelve months.

This ball has yet to pick up speed
Posted by Aust, London, UK on Thursday 4 December 2008 at 13:19 UAE time


Reading outside the UAE, most assesments seem to be indicating a much greater fall in prices; up to 80% on "off plan" stuff.

When something was highly mortgaged as many of these were and the value falls to below the safe margin dictated by the mortgage agreement then the investor needs to pay cash to the bank. That, for example, could push the weaker investors into fire-sales of some appartments to pay the cash calls on the mortgages of the ones they consider to be more valuable. Those firesales depress the prices further causing another cycle.

Unless the government is planning to step in and start buying up units on the secondary market then the smart investor will surely be waiting until the dust settles and the prices have bottomed out.

price drops
Posted by Paul, Dubai, UAE on Thursday 4 December 2008 at 10:44 UAE time


To be fair to colliers, what they are really saying is that when the figures for Q4 are released, they will show price falls. The data can only be released after Q4 has finished, so the fact that at the beginning of Dec colliers are announcing the data will show falls is basically an acknowledgement of what we all know is happening.

I expect like most property companies they will probably do their best to talk down the inevitability of what happens in Dubai now the bubble has well and truly popped. That 80% annual rise to Q3 would need a 45% fall to take back to where it was just a year ago. The economy a year ago was red hot, far more money, speculators, and optimism. That makes is reasonable to assume that now lending has dried up, the world economy is on the skids, oil is at 4 year lows and the bubble has well and truly popped in Dubai, we should expect much larger falls in the coming months.

There will be denial all the way down of course, but this is shaping up very similar to Singapore and Taiwan in the 90s. So falls could certainly hit 80%+ after 3-4 years and take 20 years to reach the peaks of earlier this year.

Let's not forget, the people who are most optimistic about Dubai prices stabilizing soon are the very same ones who just 3-4 months ago were saying that Dubai was immune and property would continue to increase in value with no chance of a crash. They are by and large salesmen who simply do not have a grasp of economics.

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