Dubai property prices fall 1.9%, no signs of recovery

Monday, 14 February 2011 10:15 AM

PRICE DROP: Property prices in Dubai, the Arabian Gulf business hub, fell 1.9 percent in January while rents dropped 0.7 percent, Deutsche Bank said (Getty Images)

Property prices in Dubai, the Arabian Gulf business hub, fell 1.9 percent in January while rents dropped 0.7 percent, Deutsche Bank said.

“Although the pace of decline has slowed lately, we still do not see any improvement in fundamentals that could trigger a recovery,” analysts Nabil Ahmed and Athmane Benzerroug wrote in a note to clients, seen by Bloomberg.

“The supply overhang still looms large, homebuyers still lack appetite, transaction volumes remain anemic, banks remain cautious lenders and international investors are still wary of the UAE property market.”

Emaar Properties is Deutsche Bank’s top pick among UAE developers “given its more resilient profile,” according to the note.

Analysts in January predicted that Dubai property prices, already 60 percent off their peak, will plunge a further 10 percent over the next two years as fresh supply floods the market.

A property boom in Dubai collapsed at the end of 2008 when it was hit by the global financial crisis and the Gulf state's debt crisis.

In oil-rich Abu Dhabi, which weathered the financial crisis better than Dubai, prices have already fallen 45 percent from their peak.

The UAE’s Minister of Economy last month told Arabian Business that concerns about oversupply were exaggerated as project cancellations had thinned the real estate pipeline.

“I believe the worst is over for property. And in my estimation, at the end of 2011 and beginning of 2012, we will see positive movement,” said Sultan Al Mansouri.

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Posted by: Ray Saturday, 26 February 2011 9:36 AM[UAE] - U.A.E.

I have a LLC co. since 1999 in Dubai, for which I use a "leased/rented" office. In 2004 I invested in a "Freehold" office unit (Dely in 2006) in JLT DMCC (it was Dxb Metals & Commodities then), so on possession I will stop renting a office & move to my own office, by which time the cost whcih I had spent for fitting & furnishing the rented office in 1999 has already depreciated in full. In 2006 they made it a "FREE ZONE" under JAFZA. Now when I received possession in Sept 2008 (yes 2 yrs late), DMCC (now Dxb Multi-Commodities Centre) rules warrant that I have to cancel my LLC license & apply for a new DMCC License which cost AED 32,000 + AEd 14K for annual renewals. To fit out office I hv to spend abt AED 10K for various permissions. THIS IS EXTREMELY UNFAIR, as the whole purpose of buying the office is lost. I continue to use the "rented" office having again spent money in 2008 to re-furnish it & upgrade harwares, IT etc. Original Investors should be allow to shift by paying a FEE.

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Posted by: Avina Larf Friday, 25 February 2011 9:00 AM[UAE] - GB

With such an over supply of property on the market, much of which is owned by foreign investors the best thing the government could do right now is to make the rules for
dubai holiday rentals more relaxed.

Holiday rentals will bring more visitors to Dubai and help property owners to keep up with their payments until the market picks up. ( 5 years or so)

..everybody wins

Posted by: Telcoguy Friday, 25 February 2011 6:57 PM[UAE] - UAE

Are you an owner in Dubai by any chance? Not everybody wins. What about the hotels already facing massive oversupply (do not take my word, BCG was working on this last year)... there is never such a thing as a "win-win" outside textbooks and politicians talk.
As losses tend to be more easily measured people becomes more vocal, specially if the wins are more widely distributed. You will have, for example, French farmers dumping Spanish/Moroccan/Romanian fruits and vegetables on the road and threatening to vote for the opposition party in next elections. You will never see consumers fighting riot police to get their strawberries half an euro cheaper.
Same with steel workers in the USA, or any other conflict you may hear of.
It is essentially impossible to do anything that does not impact adversely on someone, on a ideal world you would have wealth transfer mechanisms (i.e., taxes) set up to compensate this people for their losses.

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Posted by: TD Friday, 25 February 2011 8:59 AM[UAE] - UAE

Thanks for your comments ? now I understand ? Dubai need investors and change its rules, in particular regulations on visa restrictions (I know initially it was 99 years ? then changed it 3 years and now just six months). ME unrest probably a golden opportunity for UAE ? UAE should grant unconditional stay for investors (who could invest at least AED 2 million in UAE) from unstable countries like Egypt, Libya, Bahrain, etc. I know Australia and Malaysia do the same and they even grant tax conisations to investors. Thanks for all of you guys for make me realise the reality.

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Posted by: Red Snappa Thursday, 24 February 2011 10:17 AM[UAE] - Ireland

I should think that no expatriate property owner or investor awaiting delivery of a property wishes Dubai bad things, they presumably also want to keep their jobs to pay for the lives and their properties.

But nobody can merely talk the market up, you can be absolutely sure that mortgage lenders will be valueing properties for lending purposes at the very lowest end in a falling market.

Everybody has to acknowledge the truth that it is only the market that will find its final and true value using all the normal international criteria to do so.

What are comparitive prices elsewhere in the world are they higher or lower than Dubai?
Is there an oversupply of property?
What are quality aspects?
What are the running and upkeep costs?
What is the rental return?
Are my basic legal rights as strong as other countries i.e. can I win against government and local interests?
What are my rights to reside in the country?
Do I have normal civil rights?
Recovery will take years really

Posted by: Ali Thursday, 24 February 2011 12:56 PM[UAE] - Canada

Companies like nakheel which are state owned have delayed projects and even cancelled some, but are not willing to refund investors. Even many of the expatriates who worked with such companies are in jail because they were not paid for the jobs they had done and now don't have any money to pay for the commitments they made to other people.
What can you do about such companies? You cannot fight them, it will be like fighting the law.

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Posted by: Vicky Wednesday, 23 February 2011 4:54 PM[UAE] - Canada

'Bite the hand that feeds' is a fair comment to make about the developers here. Using the ambiguous and poorly structured regulations and loopholes, developers have made a unscrupulous run on investor's money, trust and commitments. It is hard to expect the confidence to come back anytime soon. Bring back realistic and equitable laws that will protect the interests of all parties. Investors who got in merely on speculation have already taken a hit and gone for a good while. Its the serious and long term guys who are suffering in the hands of merry making developers. Bring back good laws, make good the promises; recovery might just be round the corner if the intensions are genuine. I think there funds are plenty in the sidelines these days.

Posted by: Telcoguy Thursday, 24 February 2011 11:31 AM[UAE] - Uae

@Wael, I am not criticizing this approach. I am stating a fact, and you seem to agree with it. But then, how do you expect investors here? I am ok with it, I will simply try to minimize my spending and investment here. If this is any good for the UAE in the long term or not, is clearly not my call.

Also, when GCC investors go abroad they expect the protection of the law, something they do not offer here. That is at the very least, interesting.

I am very curious about something. How is being subject to the same laws is a disadvantage?

About the materialistic part, well. I will pass on that one.

Thanks for an honest post.

Posted by: Vicky Thursday, 24 February 2011 10:16 AM[UAE] - Canada

Telco, thats pretty much my feeling too. To get out of the hole, one has to be ready to go on hands and knees and throw away the blinkers. Seems too much to ask. While we rewind and watch the fantasy tapes of imaginary & everlasting prosperity, so-called 'poorer' cousins around the world are marching ahead... One who did not have to work for success will always think that progress comes on an automatic conveyer belt.

Posted by: Wael Thursday, 24 February 2011 10:06 AM[UAE] - UAE

In reply to TelcoGuy, I am not Emirati, but i understand why developers are supported. I would support my brother against someone from another town, no matter what. So its perfectly natural for local developers, which are led by sons of the soil, to be preferred by the govt against foreign investors who are here today and will run away tomorrow.
Locals are not as materialistic as expats and love this country and will do so no matter what, so its natural that they will be supported against foreigners whose only aim is money.
As for driving, yes, locals are the minority and are disavantaged by the fact that they are subject to the same laws that all the expats are, its their country after all.