Dubai house prices set to slip 5% in 2012 - experts

Tuesday, 31 January 2012 6:43 PM

(Credit: Bloomberg News)

A nearly four-year decline in house prices in the UAE won't end this year, as oversupply and concerns over the health of global economy weigh on the market, a Reuters poll showed on Tuesday.

Growth in the second largest Arab economy is expected to slow this year to 3.1 percent. That will not help Dubai's property prices to recover after plunging by two-thirds from their 2008 peak.

The poll of 11 respondents, including banks, investment firms and research institutions showed house prices in Dubai's beaten-down real estate sector will slip by a median 5 percent in 2012. Prices in the emirate, which is home to the world's tallest tower, the Burj Khalifa, will ultimately ease another 8 percent from here, a median of nine respondents showed.

Global markets were rattled in 2009 when Dubai announced a $25bn debt restructuring of conglomerate Dubai World , bringing its historic building spree to a halt.

Neighbouring Abu Dhabi, which was resilient during Dubai's property market collapse but is now showing signs of pressure, will see housing prices fall by as much as 11 percent this year.

"Macroeconomic concerns compounded with an ongoing supply-demand mismatch will further delay the recovery of the UAE property market," said Patrick Rahal, manager at Doha-based investment company The First Investor.

Four respondents said Dubai's property prices will stabilise during the year, while three said they would not do so until 2013 or beyond. Others thought prices had already reached bottom.

Expectations that Dubai property will continue to fall in value come as homes prices in the United States, where a spectacular collapse in the housing sector triggered the 2008-09 financial crisis, may finally be stabilising.

A Reuters poll of US home prices found a consensus for no change in the S&P/Case-Shiller home price index in 2012.

Economic growth in the UAE is expected to slow to 3.1 percent next year from 3.9 percent in 2011, in line with most of the other Gulf oil exporters, weighed down by a global slump.

Real estate and construction accounts for nearly 22 percent of the country's GDP.

Dubai's aggressive building drive has resulted in oversupply, with thousands of new residential and commercial units set to enter the Dubai real estate market.

Dubai's property market is oversupplied by 30 percent, a median of seven respondents showed. Abu Dhabi is oversupplied by 20 percent.

"The key message is that despite some recent stability, we still have a good chunk of supply coming in 2012 and as long as new jobs are not created to absorb the new supply, we are not likely to see any recovery," said Athmane Benzerroug, analyst at Deutsche Bank.

Rental prices in Dubai and Abu Dhabi will also see a downward trend, dropping 5 percent and 10 percent respectively.

Abu Dhabi, the capital city of the UAE, fared better during the downturn but is now facing challenges as a huge supply of high-end homes are expected to come onto the market.

Across the oil-rich state, which accounts for more than half of the UAE's economy, government-backed real estate, commercial and tourism projects, many conceived during the boom years of 2003-2008, are under review and in some cases being delayed or put on hold.

Abu Dhabi pushed back the opening of the much talked about local branches of Louvre and Guggenheim art museums earlier this month.

"In Abu Dhabi, the prices and rentals are expected to be under downward pressure due to increasing supply of housing units in the capital at a time where there (is) less demand," said Sajeer Babu, analyst at National Bank of Abu Dhabi.

A median of 10 respondents in the poll said Abu Dhabi's house prices will fall 61 percent from its peak in 2008 and 14 percent from here.

Four out of 10 respondents expected Abu Dhabi's house prices to fall by 15 percent and above in 2012.

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Posted by: Farhan Sunday, 18 March 2012 8:11 AM[UAE] - Bahrain

Dubai is a happening place before or after property bubble. The infrastructure cannot be replicated elsewhere. I believe it will revive in the near future. GCC has its strenth. Saudi crowd alone can absorb the burden of reviving tourism market. One still struggles to get a decent hotel at reasonable price.
Cheers.

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Posted by: Richard Li Friday, 3 February 2012 11:03 AM[UAE] - Hong Kong

During the peak in 2008, the price of a one-bedroom apartment in South Ridge is about AED 2.2M and in Discovery Gardens AED 1.0M. Based on Red Snappa's comment, for Dubai property to ever recover, the prices of these apartments need to be 85% lower, ie. AED 330K and AED 150K respectively. That'd be way below its original selling price or even the breakeven cost of construction (not taking into account the land cost etc. yet). Honestly, I can't find an equivalent apartment in any country on this planet that is projecting at least a 3% GDP growth with a comparable infrastructure and quality of life as Dubai going for that kind of price; ie., US$40-90/sqft. Not even in the 3rd-tier cities of China (9% growth) or India (7% growth) where their 2nd tier cities Sichuan, Chongqing, Goa, Jaipur are already classified as hardship locations per the U.S. State Department.

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Posted by: Omar Thursday, 2 February 2012 8:30 PM[UAE] - dubai

Ok for Mr. xx who asked for facts: Please count with me!!!UAE produces 2.7 million barrels daily x 110$ x 365 days =????Cashhhh- No money, no oil!!!UAE population less than 1 million people so per person??!!!+ USA is in a much better shape unemployment is 8% heading to 7% shortly. it's all political. Even Europe is not that bad!!It's all a power struggle between Germany, France and UK. Unless if you really believe Portugal or Greece or Hungary are Europe (driving and corruption worse than Central Africa!!!). they were brought into Europe for cheap labour and political reasons - now Germany is paying the price!!!Even Japan post Tsunami is recovering rapidly!!

Posted by: mayola Sunday, 5 February 2012 10:12 AM[UAE] - UAE

Omar, you are misrepresenting facts here. Last I read, UAE population was 8.26m in 2010 H1 of which Emiratis account for 948,000. If you want readers to take you seriously, then you need to sharpen up your analytical skills.

Posted by: Wildwine Friday, 3 February 2012 8:03 PM[UAE] - UAE

"Even Europe is not that bad!!" wow Omar that's new!!!

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Posted by: John Thomas Thursday, 2 February 2012 2:21 PM[UAE] - UAE

OMAR - Oh Omar, just go away will you?! 51 million passengers all coming to Dubai? you need to stay off the soda old chap!!! TRANSITING means anything to you, you understand the meaning of the word right? You just don't quit do you? Even if the truth and REALITY hits you upside the head 100 times! Sad to say the least!, we ALL know you are an advocate for the DEFUNCT Dubai RE sector - but note the adjective - "DEFUNCT" let it go will you!

Posted by: Telcoguy Thursday, 2 February 2012 6:48 PM[UAE] - UAE

@gavin I just booked Grosvenor House three rooms, double, for four days. 1000 dhms per night/room. I used lastminute.
You can find 5 star hotels for roughly half if you want.
Dubai 2007 was just a credit bubble, foreign credit that needs to be repaid at the tune of US$120bn.
There is going to take a long time to see anything like that, this time fools and their money got parted for good.
I would like to point that the 51 M passengers include transit passengers. In fact depending how they are counted, I suspect a transit passenger can actually be counted four times, as he arrives on one plane leaves on another (2) and then returns.
In fact total number of tourists is roughly 10-11 M.
I was not going to go into the "negative"/"positive" aspects of your comment, but I can not help saying that what Dubai needs is people with better critical thinking capabilities. But that is just an opinion.

Posted by: Gavin Thursday, 2 February 2012 5:22 PM[UAE] - U.K

51 million passengers are audited figures and not given by Omar. This ARE NOT TRANSIT passengers. Please check facts before randomly stating facts are incorrect. You need to first call any hotel and check if a single room is available and you will know.
Fact is very soon we will be in 2007 market. We need positive people and not negative people like you.

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Posted by: Birdie Thursday, 2 February 2012 11:38 AM[UAE] - Global

The prediction of a 5% decline is based on the 'off the cuff' numbers provided by 11 'experts' who have been proved so wrong in the past . One investment bank predicted a 40% fall, when in fact the prices rose 20% in prime areas . Same experts stated that new supply will be 27,000 units in 2011 , but actually it was no more than 13,000!

I am surprised no one talks of demand.
European and US central banks have added massive cheap liquidity ,( and promised more) , part of which will seep into Dubai Real Estate . Investors and businessmen are already flocking to Dubai, attracted by lower cost, relatively higher growth rates and now a rapidly improving regulatory regime.

Consequently, Dubai's population is now increasing 100,000 per annum and 100 new businesses are being established in JLT and International City each, every month. New supply is now reduced to a trickle ( max 10,000 units in 2012)
Excess supply is rapidly being absorbed .
Ignore these signs at your own peril !

Posted by: Grant Holt Thursday, 2 February 2012 5:21 PM[UAE] - UAE

Birdie and Omar, now there's a comedy double act in the making.

I just can't get enough of you two and your scripted Tom foolery!

Keep up the good work you give us hours of entertainment.

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Dubai house prices set to slip 5% in 2012 - experts

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