House prices to climb 15% this year

Sunday, 23 March 2008 11:41 AM

Massive housing shortages within Dubai's booming property market will thrust real estate prices up 15% this year, according to a report by Standard Chartered.

The bank said the emirate’s real estate market faced years of undersupply due to population growth and project delays.

“Our view is that we will see growth rates of around 15% in real estate prices this year. We would view any rises above this as a sign of overheating," Philippe Dauba-Pantanacce, senior economist at Standard Chartered, said in the report.

"Residential demand has not been fully met by supply, because of higher than expected population growth, and because the supply side has been unable to deliver the planned units."

New demand for residential units is estimated at around 70,000 a year, but the supply is only 57,000 units, with insiders suggesting that only a third of the residential units planned for 2007 have been delivered, the report said.

Dubai’s projected population growth rate of 10% per annum would also well exceed the emirate’s planned housing and infrastructure capacity, it said.

The report said prices in the commercial sector would also continue to rise, despite the large number of units expected to come onto the market.

“A substantial amount of office space is expected to come onto the market in the next 18 to 36 months, which could ease price pressures, but we do not see prices collapsing in this environment,” Dauba-Pantanacce said.

Dauba-Pantanacce said concerns that Dubai's property market was a "bubble" waiting to burst were unjustified as the market was underpinned by very strong fundamentals.

However, he said sector needed urgent management to stop it overheating due to inflation, which hit a 19-year high of 9.3% in 2006, the latest official figure.

Dauba-Pantanacce called on the UAE to revalue or sever its link to the US currency to help fight inflation.

“Because of the dollar peg, the expansionary policy of the Fed is being imported into the Gulf, meaning that borrowers are being rewarded and the clear danger is more speculative inflows into the housing market,” he warned.

Sky-high house prices in Dubai will rocket even further this year as the price of materials and wages drive up construction costs, Egyptian investment bank EFG-Hermes said on Tuesday.

Egyptian investment bank EFG-Hermes in January predicted UAE house prices would rise by 5-10% this year, but last month said strong demand for property, coupled with a housing supply shortage, were likely to push prices up even further.

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Posted by: Nina ALi Tuesday, 25 March 2008 12:48 AM[UAE] - UAE

I agree with all of you, it is the interests of the speculators to keep the market high. It is not only Marina that has plenty of vacant apartments! Look at International City, more than 50% of the buildings are empty due to incredible prices in relation to space of units and quality! Many people I know cannot sell and do not rent in less not to compromise on present market value! Dubai is a beautiful place to live in but I just wonder when will some one move to end this turmoil and help the average person.

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Posted by: Cameron Monday, 24 March 2008 8:32 AM[UAE]

I completely disagree with Dubai property values set to increase by 15%. It is the opinion of myself and alot of expats I've discussed this with that the Real Estate, Banking, and Building sectors are to blame for the hype. Have you noticed that the media claims shortages everywhere yet in the Dubai Marina you can go to many a building and inquire about rentals and there are alot available - just not affordable for most people. Purchase anyone? Well at least you know that the banks are not willing to lend unless you put up a considerable amount first hence it removes alot of the risk factor if the market were to cool down. It tells you something when the banks are hesitant to lend and the builders release only certain floors for sale and tell you these are the only apartments left to purchase. Go back the next week and suddenly there are more on offer. Property Shortage - take a look in the Gulf News and the ever expanding Real Estate Sales section. Study it for a period of 2-3 months and you'll see the same properties listed and/or alot on offer. I'll keep saving for the time being and wait for this false market to crash and/or correct itself. My $0.02...

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Posted by: Rekha Malhotra Monday, 24 March 2008 8:31 AM[UAE] - UAE

I cannot understand how can some analyst forecast such reports. I mean clearly as many of us feel and I do agree with Jenny's comment, that rather there is a shortage of affordable accomodation. I know of people who early end up buying a property in the hope of an appreciation and are stuck without being able to sell them and have kep the property for a long time to be able to sell their property and we talk about a 15% increase in the prices? To be realistic, even though Dubai is booming but it cannot be New York or other international hubs that demand such expensive prices for these properties. The growth has to be gradual and more focused than building the economy on a hype and crash severly. We have seen what has happened recently with the sub-prime that hit the US. Lessons need to be learnt from these experiences.

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Posted by: ramakant dixit Sunday, 23 March 2008 11:49 PM[UAE]

This is all gimmick by real estate agent they manipulate situation and exploit tenants/clients/customers because there is no regulatory body to monitor their operations.

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Posted by: Nitin Sunday, 23 March 2008 11:13 PM[UAE] - UAE

Prices are going up not because of market dynamics (i.e. demand & supply factors) but purely due to speculative interests of biggies (lobby of builders, banks, investors etc.). It's more hype created to offload the high priced properties in the hands of the public at large. Whenever unduly high priced properties are bought by taking loans, the effects of market crash are more severe on overall economy than any slowdown. Example of USA is before all of us. The fact remains that one and only cause of inflation in UAE is nothing but uncontrolled rentals and house prices (which unfortunately are dependent in this country on rental value of the property).

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