Villa prices fall by up to 45% amid real estate slump

VILLA PRICES: Homes on Jumeirah Islands, pictured, and Jumeirah Park have fallen by up to 45 percent in the last four months.

Villa prices at Jumeirah Park and Jumeirah Islands, Nakheel’s exclusive residential developments in Dubai, have plunged up to 45 percent in the last four months, Arabian Business has learnt.

Brokers across the UAE said speculators were desperately scrambling to off-load property before prices fell further.

Imran Aslam, agent at Dubai-based property broker AAA said completed three to four bedroom villas on Jumeirah Islands were now on the market for as low as six million dirhams, down from 10.5 million dirhams four months ago.

“It’s a big difference now. Investors are quickly reducing prices. They are also finding they have got too many [properties], so they want to sell. At the moment there is no stable price in the market.”

Aslam said off-plan villas at Jumeirah Park, a 350 hectare planned residential community due for completion in the next few months, have fallen in price by 40 percent.

Distressed investors are fleeing Dubai’s once red hot real estate market as the global credit crunch hits demand, sending values tumbling.

Lack of mortgage availability exacerbated by a regional liquidity squeeze is also hampering would be buyers, agents said.

Adriana Kapostikova, broker at Dubai Waterfront Properties said: “It [the market] is going down. This is the problem. There are people putting prices down and down because they want to sell. It’s cheap now.”

Up-market villas on Jumeirah Islands, a smart residential enclave consisting of a series of man-made islands near Emirates Golf Club, have come down in value from 12 million dirhams to nine million dirhams, a reduction of 30 percent, Kapostikova said.

Abu Dhabi-based broker Ocean View said real estate values at Jumeirah Park had slipped 40 to 50 percent in the last few months.

Private developer Nakheel completed Jumeirah Islands in 2006. Villas at Jumeirah Park, which is a family orientated development with a number of open spaces and parks, range from three-five bedroom villas.

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READERS' COMMENTS

Everything's O.K. for the medium to long run ....past 6 years was a pre-party. The PARTY has not even begun !
Posted by Ned on Tuesday 13 January 2009 at 13:32 UAE time


It's sad to note that many readers thinking is just short or immediate term ! If you take a medium to long term perspective on Dubai, you will note that the exponential growth of the economy hasn't even started yet because at this time we are just living in a constuction zone. Wait till all or even half of what's planned is built and ready !

What goes up must come doen
Posted by Dubai guy on Sunday 11 January 2009 at 00:38 UAE time

Newtons' Law of Gravity - applied to the real estate market !!!

Only in this case, it's not just a matter of demand drop-off, it's also about money supply - when the major Banks in the UAE are too scared to bet on the market, the speculator would be stark raving mad to buy at this point in time !!!

8-10 months from now prices should be back to 2006 levels, that's when 'end-users' may start to trickle back in ... until then, just try to hold on to your jobs !!!!

I feel sorry for Dubai
Posted by Aftershock, dubai, uae on Saturday 10 January 2009 at 01:19 UAE time


The whole situation was very badly managed from day 1. Management skills are very poor across the board….be it RERA, developers, central bank and the list goes on ……The crisis caught them by surprise and their reactions where terrible to say the least

1)Developers kept on announcing unrealistic projects during cityscape (Nakeel Harbour and Meraas Jumirah gardens) and this was the case for the last couple of years (why the hell does Dubai need 3 palms, The world, universe, lagoons and waterfront) This has raised a lot of doubts about the viability and sustainability of the Dubai model. It’s basically defying common sense. Let alone the $20 million Palm party that took place while the property and stock markets were taking a shower!

2)Central bank instructed banks (directly or indirectly) to curb lending. For the last 4 or 5 years credit was so easy in this country…then all of the sudden the global turmoil made them wake up and realize that loans-to-deposit ratios are as high as 150%, so they dried out the market completely. Don’t buy into this 120 billion fund and don’t blame the banks for the lack of liquidity. This is not a bailout; it’s just money available for borrowing from the central bank under very strict rules and regulations (one key rule is to stop lending to the real estate sector) Once a bank asks for money, the central bank takes full control of the operation and imposes strict rules even further

3)Central bank refused to follow the US interest rate cuts despite of extremely bad liquidity conditions. The Emirates interbank lending rate is almost double the global average (Libor) which shows how illiquid the UAE banking system is. I really can’t understand why the UAE didn’t mirror the rate cuts? The so-called “hot money” (AED 200 billion) that was speculating on the dirham revaluation has exited the system and is not coming back in the foreseeable future. This tactic will not bring it bank….in a time where we badly need it!! I hope it’s not a tool to curb inflation, by all means inflation will decline next year without any restrictions…oil prices are 70% down, dollar has soared by almost 25%, real estate has literally collapsed, business confidence, consumer consumption and tourism have sharply dropped. So for god’s sake…where can inflation come from?

4)Last but not least, banks are shooting themselves in the foot. By cutting down mortgages they are basically killing the market they are heavily exposed to. 2009 will witness a lot of defaults and possibly foreclosures because there was absolutely no financail support when these so-called speculators where trying to exist the market. How can you we let go of 70% of the market all at once? Keeping in mind that the vast majority are expats who have no loyalty to this country and will simply sell what they can and jump on the first plane back home. The fastest crash in history was an inevitable result

Basic economics states that the government should ease up monetary policies and lending during an economic downturn. The US has learned from their big mistake during the 1930’s great depression. Thus, they are tackling this crisis with massive stimulus packages and 0% interest rates.
UAE should NOT take advantage of such a serious economic downturn to start structural reform and impose stringent rules and regulation that will only make matters worse. Reform should take place during an economic boom as it has a very negative impact if implemented during a bust. I wonder why we didn’t see these rules and regulation when banks where financing 95% of property value, every tom, dick and harry was easily getting a 250k loan. Where was RERA when investors where buying floors and even buildings, Emaar was selling the square foot for 4000 and 5000 dirhmas in downtown burj dubai (Who will buy a 4 million dirham studio, other than a speculator?) Please don’t blame the speculators only for what happened in Dubai. For sure they are greedy, but it’s the system that made speculate!! Now the system is trying to squeeze them out and they are dragging the whole economy with them (real estate stands for 30 to 40% of Dubai’s economy). Dubai is now the object of criticism and sarcasm in global media cuz of the falling real estate and mounting debt (Newsweek, the guardian and WSJ to name a few) It will be very difficult to restore this lost confidence in the future. I truly feel sorry for Dubai to end this way!!

This market has witnessed a rapid and severe shift in liquidity and credit availability. UAE in general and Dubai in particular are still nascent markets and cannot withstand such a shock. Hence, real estate collapsed, business confidence dropped, lay offs kicked in and rumors spread the market. Unfortunately, the situation was very badly managed!! It should’ve been handled in a smarter way with a much more gradual shift. Of course the crisis caught us all by surprise, but the UAE with it’s financial strength could have easily absorbed this shock i.e. reducing lending rates and credit flow in a more gradual fashion

Buy when everyone is selling and sell when everyone is buying !
Posted by Todd on Thursday 8 January 2009 at 17:50 UAE time


....i.e. if you can find financing. Glad that many people are scared to buy right now. I am desperately looking for 85% and above financing to buy a villa urgently before the prices start to go up again. It will be nice if anyone can provide any info. EIBOR is already on its way down and will stay down until US recession is over.

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