Dubai house prices close to bottom, says JLL

Apartment prices flatline as investors seek safe haven buys, says real estate consultancy
Dubai house prices close to bottom, says JLL
Dubai Marina
By Jo Anne Bladd
Tue 27 Sep 2011 07:32 AM

Dubai villa and apartment prices may soon bottom out as political turmoil elsewhere in the Middle East and North Africa prompts buyers to look for less-risky investments, Jones Lang LaSalle said.

Apartment prices in most parts of the Gulf sheikdom are stabilizing or declining slightly, “indicating that the market might be very near its bottom,” the US property broker said in a research report Monday.

Villa sales increased 59 percent by value even as volume fell by nearly a third, indicating that higher-priced properties are attracting the most buyers.

The renewed interest hasn’t resulted in rents or property prices increasing across the board, although some localized markets are now approaching stability, the report said.

"Interest from those displaced by the Arab Spring or looking for safe-haven residential properties in Dubai is reported to be particularly strong for upmarket villas in iconic projects such as Palm Jumeirah," it said.

Dubai home prices have dropped 64 percent from their peak in mid-2008 after the global credit crisis caused mortgage lending to dry up and drove speculators from the market.

The UAE, which includes Dubai and Abu Dhabi, has largely avoided the Arab Spring political upheavals that unseated regimes and disrupted investment in countries including Egypt, Libya and Tunisia.

The Arab Spring “has helped push the hotel and retail sectors into the recovery stage and selected sectors of the residential market are also improving,” Alan Robertson, chief executive officer of Jones Lang for the Middle East and North Africa, said in the report.

"During 2011, Dubai has experienced heavy visitation in the wake of the socio-political uncertainties that has made such destinations as Egypt and Lebanon less attractive."

Dubai’s hotel market has seen the biggest benefit from the regional unrest. Average occupancy rates rose to 78 percent in July from 60 percent in the same month two years earlier, the report said.

Hotel property prices will come under pressure as more rooms are built, though the pace of development has slowed, Jones Lang said. More than 1,700 rooms were added in the year through July, increasing the supply by about three percent.

Offices have been the emirate’s worst-performing property market and the least affected by the Arab Spring this year, the report said. Vacancy rates remained in the third quarter at 44 percent on a city-wide average basis, a situation likely to worsen amid the estimated 1.3 million sq m of office space under construction.

Recovery in real estate demand could be delayed by concerns over slowing economic growth in Europe and the US. The completion of a further 5,000 homes by the end of this year will also add to an existing oversupply and may delay any recovery in prices, the report said. As many as 27,000 units are slated for completion in 2012.

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