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
By Staff writer
Mon 06 Jul 2015 01:49 PM

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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