House prices in Dubai have hit bottom and are starting to show signs of recovery as political turmoil elsewhere in the region prompts investors to look for safe-haven buys, the chairman of Emaar Properties said.
Villa and apartment prices in the Gulf emirate, which have slumped more than 60 percent from their 2008-peak, are stabilising or beginning to pick-up, said Mohamed Alabbar.
"I believe overall prices have stabilised; I think they are still holding reasonable value to, say, two years ago, so I believe the worst is behind us," he said on the sidelines of the Arabian Business Achievement Awards.
The emirate saw less than 1,700 real estate deals in the first ten months of the year, data from Dubai Land Department showed last week. Some 1,603 deals were signed off in the ten months to October, down from 5,363 during the same period in 2008.
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 that may be linked to the wave of Arab Spring unrest that has rocked economies in the region.
"I don't expect the Europe disaster to come and hit us in any way but also unfortunately the instability that is going on in the region has supported us as well," Alabbar said.
"We want them all to prosper, we don't want anyone to have a disaster but it's a fact that it's affecting us positively."
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. Between 2007 and mid-2008 prices in the emirate rallied almost 80 percent, according to Morgan Stanley.
But the market saw the biggest regional collapse in house prices in the wake of the financial crisis, as speculators fled the market and credit lines dried up.
House prices 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.
The emirate's still suppressed real estate prices could be a driver behind sales, said Ziad Makhzoumi, CFO of Arabtec, the UAE's largest builder by market value.
"Among the reasons for the optimism is that the assets are still undervalued so there is no issue of valuation going against them. Credit has not increased in the last few years [to real estate], so no one has borrowed more either. That makes the market even more stable.
There seems to be more demand in Business Bay for example, and it seems to be filling up quite quickly. I also understand that the rents are going up in some areas again."
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