Big divide in Dubai, Abu Dhabi property markets - study

The global economic crisis has resulted in an increasing divide between the property markets of Dubai and Abu Dhabi, a new report has said.

Kershaw Leonard's annual Cost of Living report describes the real estate sector as now resembling the "survival of the fittest", a major contrast to 2008 which is compared to the California gold rush of the 1800s.

While Dubai’s house prices have fallen in some areas by more than 53 percent since September 2008, the report identified areas in Abu Dhabi where prices had increased by 36 percent over the past year due to an undersupply of new properties coming on to the market

The Dubai-based recruitment and HR consultancy said the decline in house prices has had differing impacts on the UAE's two major centres.

"Out of all the cities of the UAE, it is within Dubai that some of the biggest changes have taken place," the report said, adding that rental rates in some parts of Dubai have fallen by more than 50 percent since September 2008.

"Yet, some of the most interesting observations of this year's report are the increasing differences between Dubai and Abu Dhabi, and what some see as an increasing divide between the two cities," the report, cited by Ameinfo, added.

The report said rent on a studio apartment in Dubai Marina might now be 53 percent less than in September 2008, and a two-bedroom apartment in International City 48 percent less.

In terms of villas, it said the rent on a three-bedroom in the Springs is around 44 percent less than one might have paid one year ago, and a five-bedroom on Jumeirah Palm, 22 percent less.

The report notes that inflation, fuelled primarily by the ever-increasing property bubble, reached over 12% - according to official figures - at the market's peak in 2008, although the 2008 report suggested the actual figure to be nearer 20%. One effect of the turnaround in the market has been to lower these figures.

Conversely Abu Dhabi had continued to witness increases, the report said.

"Rental prices are not only on the increase from last September, but in some cases are considerably higher - 36 percent for a studio flat on the Airport Road, or 20 percent for a one-bedroom apartment on Muroor Road, for example. This is not discounting the fact that, unlike Dubai, there is still significant undersupply in the capital," Leonard Kershaw added.

While 362,000 units are seen being needed in Abu Dhabi in 2010, only 340,000 will be available, the report said.

Dubai, on the other hand, will see an oversupply of approximately 30,000 units in 2010.

Looking ahead, the report said that although a reported $582bn worth of real estate and infrastructure projects have been put on hold or cancelled in Dubai, a further $700bn worth are ongoing throughout the UAE.

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