By Shane McGinley
UPDATE 1: Consultancy says prices stabilised in Q4 2009, still 42% down for year.
House prices rose one percent in Dubai during the fourth quarter of last year and prices have now returned to the same levels as Q2 2007, according to the latest price index published on Tuesday by Colliers International.
The real estate consultancy company said this showed the first signs of the Dubai market beginning to stabilise and supported the growing level of activity seen during October and November.
The Dubai House Price Index, compiled using actual mortgage transaction data from a range of financial institutions, declined year-on-year by 42 percent between Q4 2008 and Q4 2009 and prices have returned to the same levels as Q2 2007.
Previously, prices in the index rose seven percent in Q3, declined by nine percent in Q2 and by 41 percent in Q1.
“We anticipate price fluctuations will become less pronounced as the market matures, providing early indications that Dubai house price values are getting closer to underlying values,” said Ian Albert, regional director at Colliers International.
The volume of market transactions declined 15 percent during Q4 compared to Q3, which Colliers attributes more to seasonal slowdown rather than as a result of the Dubai debt crisis.
“We now seem to have reached the point where the market is trying to find its natural equilibrium. While we have tracked marginal variations in the performance and prices of property types, it remains to be seen how the market will react to further news of Dubai World’s debt restructure as well as the banks’ end-year results,” added Albert.
The report also found that, compared to Q3, apartment prices decreased by four percent, villa prices increased by seven percent and townhouse prices were up ten percent.
On Monday, Shuaa Capital forecast in their UAE Vision 2010 report that they believe the Dubai residential market will decline by another ten percent in 2010, as 26,650 extra units will be released into the market and the population is expected to decline by 3.6 percent.
Why should any care if current prices are at 2006 or 2005 levels ? Bottomline - 1. Prices are still too high 2. Banks are not lending or are too expensive 3. Investor confidence is shattered All 3 points need to be addressed for any hope of recovery.