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UAE property prices to plunge by 25%

The UAE real estate market will face a massive 25% drop in prices in 2008 with signs of a slowdown appearing in the fourth quarter of this year, according to a senior analyst at leading regional investment bank EFG-Hermes.

Fahd Iqbal, senior analyst and strategist, said the market would stabilize throughout 2007, however company analysts predict that the UAE will see a huge downturn in 2008 with property prices down by one quarter.
“The real estate market will peak in the third quarter of 2007 and then see signs of a slowdown in the final quarter heading into 2008,” said Iqbal at the launch of EFG’s annual UAE research yearbook.

The report said that - despite the projected doubling of Dubai's housing stock by 2010 - this year would be marked by stable property prices.

“Taking into consideration realistic delays in the pipeline of projects and a continued strong rate of immigration into Dubai, EFG-Hermes’ real estate analysts forecast the real risk to property prices to lie in 2008. However, as is the case with stock markets, the trigger lies in investor expectations.”

It added that as the year moved into the second half of 2007, and particularly into Q4, concerns over the property market would “begin to have an impact” and result in a reversal in the stock market, “a weakness that could continue through at least the first half of 2008”, depending on the speed and size of the property market correction.

Looking further ahead, it added that a “measured correction” in property prices would be positive for UAE markets as it would “wipe the slate clean” and set the stage for a sturdy and longer-lasting recovery going forward.

“If property prices become a risky option then the local stock markets will also suffer, especially with 50% of the market cap connected to the real estate industry in the Emirates,” added Iqbal.

Earlier this week, ArabianBusiness.com reported that a ‘softening’ of prices would be seen in the emirate of Dubai as a minimum of 125,000 residential are released over the next three years.  A study by Shuaa Capital and Colliers International predict that this surge in supply will exceed demand and have a negative effect on prices.

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