Fearful buyers shelve 2008 property plans

The majority of Gulf residents will ignore increasingly tempting mortgage offers from local banks and continue to rent in 2008 in the belief that house prices have peaked and will begin to fall next year, according to the latest ArabianBusiness.com survey.

Despite rising rental rates and record high inflation across the GCC, 43% of respondents said they would continue to rent their properties rather than risk buying due to analyst concerns that the market may reach its peak this year.

Egyptian investment bank EFG-Hermes said last month that property prices in Dubai look set to rise between 5% and 10% this year, but that in 2009 the market would swing back in the favour of buyers as over 120,000 units come onto the market over the next two years.

EFG-Hermes said would begin declining in next year, with a cumulative decline of 15% to 20% between 2009 and 2011.

However, over a third of respondents (37%) to the poll said they would still look to buy, but instead focus on places where they believe there will be continued demand into 2009 and beyond.

While Gulf Arab states such as the UAE, Qatar and Bahrain have seen property prices go through the roof in recent years due to supply shortages, neighbouring countries Saudi Arabia and Kuwait have yet to see such drastic rises.

The head of Kuwait's Al-Mutakhassis Real Estate said on Saturday that the country would experience a property boom this year due to lower income tax on foreign firms and the creation of the GCC common market.

While analysts predict property prices in Saudi Arabia will rise further over the next few years as demand continues to outstrip supply.

A fifth of respondents (20%) to the survey said they were still undecided on whether to buy or rent, as they were not sure which way the market would swing.

Soaring property prices and the rising cost of imports due to the falling value of the US dollar have pushed up inflation to record levels across the GCC.