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Property could plummet, ministry warns
Speculators who overestimate the value of new housing units could cause property values to plummet as thousands of new homes come onto the market over the next few years, Abu Dhabi’s Department of Planning and Economy (DPE) warned on Saturday.
Buyers who overpay for properties bought off-plan were creating “a risky business which may result in a sharp drop in the value of new units, thus undermining the future of the sector and other supporting sectors such as building and construction”, the department said.
The department also called for legislation to rein in banks and financial institutions which make it too easy to borrow money, saying banks' and businesses' over-dependence on this [real estate] business has to be put under tight control”.
Developers and analysts dismissed the concerns, saying fast off-plan sales were “common in a ‘young market’ in which primary and secondary markets emerged for investors and residents respectively”, according to UAE daily The National.
HSBC said last month real estate prices in Abu Dhabi were likely to shoot up by as much as 25% this year, driven by the rising cost of raw materials due to further weakening in the value of the US dollar and by the continued shortage of housing in the market.
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Posted by Salman Ahmed, Abu dhabi, UAE on 19 May 2008 at 10:25 UAE time
Similar comments were raised when construction boom started in Dubai in 2002. However despite millions of units already floating in market in Duabi, with many more in the pipeline, still no slump has been witnessed there as yet. Moreover with so much concurrent development and new projects abu dhabi has announced i don't think any downturn is expected.
Posted by dave, Dubai, UAE on 18 May 2008 at 15:50 UAE time
Abu Dhabi, richest city in world, $127 oil per barrel probably heading towards $200 per barrel, the deal with nuclear energy with the French for even more energy resource, plus investment branding the city in other countries through their airline and other means...it\'s only going to go up!!!
Posted by gordon, Dubai, U.A.E. on 18 May 2008 at 14:58 UAE time
If it looks like a bubble and smells like a bubble, then it is a bubble. The positive articles I keep reading are written by people who have an interest in keeping prices high. This was a good article and is warning people about a potential market correction. The arguments being used about shortage of accomodation is the same arguments used to justify the bubble in the UK property market. It is not the shortage that will determine the price, but the ability to pay and to borow money to buys such properties. If this dries up, then prices fall.
Posted by sandi, dubai, uae on 18 May 2008 at 10:32 UAE time
'buyers who overpay for properties off plan' last I heard it was the developers who set the price. I don't think buyers would ever want to pay more! Even if one is speculating you still have to sell the 'overpriced' property to make a profit. Its the developers and all those on the selling side who need to rethink their pricing.