By Andy Sambidge
UBS also says higher default risk could push prices 40% lower at auction.
House prices in Dubai could fall a further 30 percent from current levels and up to 150,000 homes could be lying empty by the end of 2011, UBS has said.
"We reiterate our view that by end of 2011 Dubai property oversupply on residential and commercial properties may reach roughly 40-50 percent and house prices may decline another 30 percent from current levels," analyst Saud Masud said in a research note.
"We estimate total Dubai housing supply by end of 2011 to be roughly 360,000 with oversupply potentially at 150,000 residential units," he added.
Masud also said property investors in the UAE may find prices to be 40 percent cheaper in the auction market as higher default risks lead to more bank repossessions.
“It would be difficult for buyers to overlook the distress level pricing in the auction market as compared to secondary markets,” he said. “Early trade-offs may be liquidity, quality, location and variety.”
His research note followed an Arabian Business report on Tuesday which revealed that Dubai’s man-made island Palm Jumeirah had seen its first property repossession.
The property was sold by the bank for AED745 per sq ft, 35 percent less than the current market rate.
Last year these guys projected price falls beyond Q4 09. The prices actually rose in Q3 09. And they haven't even talked about yeilds from buy-to-let properties which are as good as ever. What is UBS playing at.....As for the forclosed property on Palm Jumierah, it was sold at a very low price....WITHIN TWO HOURS OF LISTING.....get some perspective UBS.....
Guessing Mark Brown is a Dubai property owner or real estate agent ?
Once the new company ownership federal law is approved, there will be a boost of investments with real people to occupy the premises and this report will remain as a fairytale. If the law won't become reality I am afraid this report might come close to the truth.
745 AED per sqt is the right price for a 'quality' appartment in Dubai... this means most appartmets listed are still very much oer prices and a correction will follow. Any idea why banks are not to keen to finance properties at 90%... because the underlying value is not there... Looking at International City, Discovery Gardens, JLT... an honest price level would be between 300 and 400 AED... Never forget you will be paying your service charges on top, seems like a lot of people are forgetting about these and are only looking at the potential revenue...
what ever the under laying circumstances are the outcome is that there are too many property owners trying to sell to fewer buyer...more properties will be added this year offering more choice to buyes... Put simply; buyer has more choices and better bargaining power today and its unlikely to resolve in 2-3 years.
I won't waste too much time on UBS as they were nowhere to be found 2 years ago before the crash... I believe comments by Mark are correct as are the comments from Rinus regarding International City, Discovery Gardens and JLT. I would throw in Jumeirah Village with that group. But the villas at Arabian Ranches, Victory Heights and the Meadows will probably not see their prices fall. Villas in general are probably ok with there being a limited amount of them in the market and they may see an uptick in prices. But flats are a different story. There are a lot of flats coming on to the market to add to the glut that is already available. I believe rents may decline in the newer areas as owners panic to fill their empty flats but I am not sure how many owners are willing to sell at a loss. It would be interesting to know how many flats and villas have been purchased with mortgages in the various developments in Dubai. Developments where many properties were bought with mortgages are potential problem areas for foreclosures and sale price declines. AB should get to work on that story....
For every negative analytical report we see there are dozens of positive ones - just read Business 24-7 or Gulf News â€“ complete hokum... the underlying sensibility of all of this is simple â€“ the people issuing these reports have vested interests in driving their own profit margins â€“ profit (greed) drives all of this. Now as far as actual (not listed) prices go, I know for a fact that the 30 or so properties I have looked at over the past 3 months have seen their prices drop by a minimum of 25%. I firmly believe that speculators caused this so called crisis, whether they be traders on world markets or investors trying to make triple digit margins with the least amount of effort. This was of course easily achievable between 2004 and 2009 but I hope we (all Dubai residents) have seen the back of this, and good riddance! Rent was the only option for most pre 2002 (where a 3 bedrooms apartment in Bur Dubai was only 45k per year) and with the UAE freehold laws of the same year, the property market attracted speculators and developers from all over the world. Steadily since then, prospective owners and tenants alike have seen prices increase dramatically. Let the slide continue â€“ thatâ€™s what I say... Letâ€™s see prices come back to the reasonable levels we had pre-2005..
I don't know how some comments here equalize between International city and JLT, and say both should have the same price psf, what I know that JLT is on SZR, and it has 2 metro stations and part of emirate hills, and near Dubai marina and the sea and has a huge infrastructure and...while International city doesn't have one of these and it's near the sewage treatment plant with its nice smell??...so it seems that not only UBS is conflicting but also some persons who send such comments, and they may not have seen these areas.
Arabian Business needs to get the breakdown to make this piece more worthwhile. If the fall in population is largely affected by construction workers (which would make sense) then that wonâ€™t have an effect on property as the vast majority of these workers live in labour camps. Like anywhere in the world, villas next to the beach should retain value while areas with tower blocks and few facilities nearby wonâ€™t. What will also be interesting is how the property right next to metro stops (within 50 yards or less) is affected, as propinquity to tube or metro stops does affect price in developed cities like London. But without the breakdown then these overall figures are next to useless.
Being in the real estate sector i have sold lots of apartments to suisse nationals and also private offshore companies i believe that UBS have lost alot of customers to this region because of poor interest returns around the world and within the EU. i know lots of money has been deposited here from switzerland and Ubs private accounts they will continue to spread neagativity to keep there customers anyone buying a property for investment in the world will tend to pay 7-15% in solicitors fees notre fees and other tax which acumulates when purchasing property so as an investor your in the hole straight away here in Dubai fees are3-4% its tax free and you get a rental return of 5-10% straight away.where would you put your money?