Dubai real estate sales down 70% from peak

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House prices in Dubai showed signs of recovery in the third quarter, said JLL

House prices in Dubai showed signs of recovery in the third quarter, said JLL

Dubai saw less than 1,700 real estate deals in the first ten months of the year, government data shows, a 70 percent decline on sales made at the housing market’s peak in mid-2008.

Some 1,603 deals were signed off in the ten months to October, down from 5,363 during the same period in 2008, data from Dubai Land Department showed.

But the figures reflect a 37 percent increase in property transactions when compared to 2009 at the height of the financial crisis, suggesting fledgling signs of recovery in the city’s battered housing market.

The average number of monthly real estate sales is 160, up from 117 in 2009 but still a dramatic way from the average 536 property transactions seen a month in 2008, as off-plan properties were flipped multiple times by speculators.

“It reminds me of how truly extraordinary the market was from 2005-8, and how regular it seems to be today,” said Ryan Mahoney, CEO of Better Homes, the largest real estate firm in Dubai.

“We are operating in a market that has less than a quarter of the annual transactional value that it had in previous years and yet we are busy… and we even excited by the small spurts of growth we see from month to month.”

Charles Neil, CEO of Landmark Properties, said the rise in sales was attributable to an increase in bank lending and the increasing number of Chinese and Indian investors entering the market.  

“There has been an increase in liquidity in the market,” he said. “Banks are being more active in providing mortgages and interest rates on mortgages have come down from level of around eight to about six percent.”

Property prices in Dubai soared after the city opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments.

From start-2007 to mid-2008, prices rallied almost 80 percent, Morgan Stanley estimates showed, with billions of dollars worth of new projects launched by local developers.

But home prices in Dubai, the Gulf property market that had the biggest reversal because of the financial crisis, fell more than 60 percent in the wake of the global credit crunch.

House prices in Dubai showed signs of recovery in the third quarter, with slight rises in prime projects such as Palm Jumeirah and Arabian Ranches, Jones Lang LaSalle said in September.

But analysts remain concerned that the estimated 33,000 new homes scheduled to hit Dubai’s market by end-2012 could cause fresh declines in rental and sale prices. Renewed global financial woes and the European sovereign debt crisis are also likely to cause more pain, with Moody's last month predicting any price recovery to be delayed to 2016.

Andrew Goodwin, Dubai director of real estate consultancy DTZ, said transactions remained subdued as landlords fail to match their asking prices to new economic realities.   

“We receive significant interest from investors looking at the Dubai market but in many cases there is a discrepancy between the purchasers and sellers valuations which keeps volumes low,” he said. “Those sales that do go through are where the purchaser has a long-term confidence in the Dubai market.”

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Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

Posted by: Red Snappa

Orchestrating refunds to investors who have been left high and dry having made hefty advance payments is crucial to restore trust in the act of buying property in the future in Dubai and the laws than govern the process of completing an honest transaction which protect the good faith consumer. The only legal term that may be employed as far as the property market right now is Caveat Emptor.

However, on the basis that funds to reimburse the defrauded buyer are available in the first place and actually returned to buyers, implies a massive flight of liquidity from the UAE. Yet it is a bullet to be bitten, if the intent to restore confidence and trust in the market is genuine. A handful of people buying to live will not rebuild demand or prices, a large influx of legally confident and protected investors might.

A freezone company with the family as directors does not come cheap either, but you need the company to own the properties for inheritance purposes. Can FZ Co's get mortgages?

Posted by: MAK

I want RERA should order all the developers, whohave not yet started the projects to return the money received less 20%
back to Investors. In this way the confidence of investors will be restors and there will be no over supply infuture.
That will be win win situation.

Posted by: Get real

That situation is only a win for developers, why on earth should developers keep 20 percent of the money paid if they do not start a project??? Taking money for something which is not delivered is not acceptable, if a project is not going ahead ALL money needs to be returned to the buyer, no if or but, cheating an investor out of 20 percent will NOT restore confidence and until Dubai understands this confidences in the market here will not return in any way.

Same goes for delayed projects, until developers are forced to pay compensation for late delivery there will be no off plan market. What is needed is damage control by RERA stating anything delayed over the contractually allowable delay period will be compensated for with a percentage interest for the period of delay (just as buyer late payments would be subject to if they paid late), that is the only way any trust will start to return

Posted by: Louie Tedesco

Er, no. If I had given you money for anything, whether property or a new car, I expect my FULL amount back PLUS 20%.

You owe me money plus interest. Not the other way around.

Do you really think developers would give you a 20% price discount when you move in, assuming you property ever gets finished?

Posted by: Realtywatch

The general consensus is a continued downward spiral in property prices. With prices falling worldwide, why would this part of the world be an investment zone compared to more mature and established markets? Real estate in the UAE continues to be overvalued, purely because there are few players in the market and the most Owners/Landlords are protected by archaic property laws. Secondly, the quality of the product is not comparable to property at a similar price in other regions. Thirdly, demographics continue to be the issue across the smaller states in the Gulf. Inevitably, there will continue to be a legacy of redundant development and mothballed buildings unless the UAE and other countries can make it an attractive place to live and work over the long term. This involves bringing political stability to the region as well as overhauling the legal framework. Achieving it is no mean feat.

Posted by: Louie Tedesco

After decades of hard work in Europe we relocated here to work a few final years to then retire in Dubai. Our monthly pension incomes by far exceed what middle income families here earn. Retiring here would have brought money to Dubai, we would not take away one job, we would have spent our money here supporting and creating jobs.

Comments about perceived democratic imbalances contravene government policy which wanted foreigners, to bring money here. Even if residency is granted (again) by decree today it can be revoked tomorrow. The trust has been broken. We will retire elsewhere and be welcomed with open arms.

Posted by: Ziad

Issuing permanent residencies PR with the worsening demographic imbalance in the UAE is nothing short of suicidal and detrimental to the to the identity, culture, fabric of society, jobs, security of the UAE. We do not want the UAE to become a mini Karachi or Manila or Mumbai.

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