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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