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Mon 6 Jul 2015 01:49 PM

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Drastic property market correction in Dubai 'unlikely' - poll

Executives working in emirate do not see price plunge in next 12 months, says London Business School survey

Drastic property market correction in Dubai 'unlikely' - poll

A survey of more than 200 business executives has found that a large majority believe a drastic property market correction in Dubai is unlikely over the next 12 months, according to a marketplace intelligence survey by London Business School.

The survey, which was conducted to analyse Dubai’s booming residential property market and the possibility of another real estate ‘bubble’, revealed that 84 percent of respondents didn’t believe Dubai property prices will plunge in the same way they did in the 2008-9 market correction.

Joao Cocco, Professor of Finance, London Business School, said only 3 percent of those surveyed expect an annual decline larger than 20 percent.

Almost half of those surveyed (47 percent) say they would invest in the Dubai property market, despite speculation from real estate analysts about soaring property prices and the risk of another speculative property bubble.

Over a third cited the strong economic outlook for Dubai as their main reason for investing, while others believed that high rental yields for Dubai properties and the high quality of life in the UAE as reasons for purchasing instead of renting.

More than a third (44 percent) of the respondents said greater restrictions on real estate supply would most effectively limit market speculation and prevent a future real estate bubble. Tighter eligibility for home finance loans would also help said 18 percent of those surveyed.

“Roughly half of the executives surveyed recognise the risk that the supply of new properties will increase at a faster rate than the demand, leading to a situation of oversupply and a decline in real estate prices, and favour greater restrictions on construction as a way to mitigate this risk,” said Professor Cocco.

Business executives were divided on the question of whether property prices would move upward or downward, with just over 50 percent saying they will decrease, and 49.75 percent saying prices will remain stable or increase.

More than two thirds (68 percent) of respondents predicted that Dubai’s residential market will not continue to grow at the same rate as it has thus far.

A recent report by Knight Frank’s Global House Prices Index has shown that Dubai was one of the worst-performing housing markets in the first quarter of 2015.

According to the new research, Dubai ranked 53rd out of the 56 locations monitored - one place lower than Greece, but higher than China, Cyprus and Ukraine. The report revealed property prices in Dubai fell by 6.1 percent over a 12-month period, and were 3.7 percent lower than the previous quarter.

Dubai suffered a correction in 2008 when property prices dropped by more than 50 percent. But according to the business executives surveyed by London Business School, a drastic market correction this time around is unlikely.

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Hush 4 years ago

Having to cite the opinion of MBA students at LBS indicates the desperation of the property sector to tow the line and make predictions on a subject they aren't qualified to comment on. No one saw the 2008 crash before it happened, and most couldn't identify it while it was happening. I'm not suggesting that the same will happen now but lets just admit we really don't know whats going to happen and call it like it is.

Simon 4 years ago

The respondants to this survey obviously do not follow world events and economics and are at looking at Dubai as an 'insular' market/economy that is not effected by outside political/financial or economic conditions.

Dubai market will NOT fall because of its own endeavours, it will fall because of the effect from outside pressures just as it did in 2008/9. This is not rocket science. It is common sense and history will repeat itself.

The probem this time is that the financial stresses on the Western nations; UK, USA & Europe have massively increased in the last 6yrs. Even at ZERO interest rates the West has seen ZERO growth. That can not continue.

The printing press is the Wests life support system. Without it, the West will fall into turmoil. It is mathemactically as simple as that. Dubai will suffer as a consequences just like before.

Nothing is 'different' this time other than stakes on the table are much higher than before...

Matthias 4 years ago

The result is predictable since they asked 200 EXECUTIVES...who are between 2 and 5% of the population of Dubai. Those are exactly the same people who own their own home or their company is fully paying their rents.
It would be interesting to see where those people are living in Dubai...most probably in large villas or flats.
So again irrelevant article which is not reflecting the reality. The market is bearish.