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Thu 14 Jan 2010 01:58 PM

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Dubai house prices seen falling a further 10% in 2010

Residential property prices have only a 13% chance of picking up before 2011 - poll.

Dubai house prices seen falling a further 10% in 2010
(Getty Images)

Dubai house prices, already off some 60 percent from their peaks, are set to fall a further 10 percent in 2010, a Reuters poll showed, as the emirate's debt crisis will likely delay a property sector recovery to 2012.Residential property prices in the Gulf emirate, which boasts the world's tallest tower, have only a 13 percent chance of picking up before 2011, according to the median forecast of 12 analysts at banks, investment firms and research institutions.

Only one of 13 respondents said prices had reached a bottom, while four said they expected a trough to be reached in the first half of this year, three in the second half of 2010 and four in the first half of 2011, the poll showed on Thursday.

One said prices would not bottom out until at least the second half of 2011.

Dubai rocked the financial world on Nov. 25 when it said it would ask creditors of Dubai World, the conglomerate behind its rapid expansion, and Nakheel, builder of its palm-shaped islands, to agree to a standstill on billions of dollars of debt as a first step to restructuring.

"The recent woes of Dubai World have further sapped the prospects of a recovery in real estate," said Fabio Scacciavillani, an economist at the Dubai International Financial Centre.

Prices will fall a further 3 percent in 2011, according to the median of 10 forecasts, but one analyst said prices could still fall a further 40 percent from current levels.

"Conditions in the UAE property market will remain weak in 2010 because of unfavourable demographics, property oversupply and risks associated with cancelled or delayed projects," said Keith Edwards, head of asset management at The First Investor in Qatar.

"Furthermore, we anticipate continuation of rising vacancy ratios; however, this will depend on the asset quality or location," Edwards added.Dubai is expected to be oversupplied by 32,000 new homes by the end of 2010, according to Deutsche Bank figures.

Before news of the Dubai World debt saga broke, Dubai's once-booming property sector had already been hit hard by the global financial crisis, as billions of dollars worth of projects were put on hold or cancelled and thousands of expats lost jobs and were forced to leave the emirate.

More than 500 projects have been suspended or cancelled in the United Arab Emirates, with Dubai the most severely affected of the seven emirates that make up the federation, Dubai-based research firm Proleads said in September.

"On a long term (view) we expect the crisis will limit the supply of properties in the market due to the decrease in liquidity and financing," said Sajeer Babu, an equity analyst at National Bank of Abu Dhabi, adding the bank expected property prices to fall another 10 to 15 percent before any major recovery in prices.

Rents in Dubai are poised to fall 10 percent in 2010 and to remain flat in 2011, but four out of 12 respondents expected rents to fall 15 percent or more in 2010 while three saw prices rising in 2011.

House prices in Abu Dhabi, the UAE capital and home to most of the country's oil, are seen unchanged this year, the median of 11 forecasts showed, with three analysts expecting climbs while one expected a fall of 25 percent.

Prices are then seen rising by 3 percent in 2011.

"Abu Dhabi prices are expected to increase due to the mismatch in demand and supply and the nearing of the delivery of some of the projects," Babu said.

National Bank of Abu Dhabi expects a shortage of more than 20,000 homes by the end of 2010 with demand rising due to a population increase and limited supply.

Rents in the capital are seen falling 15 percent in 2010 and by 5 percent in 2011.(Reuters)

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Nick 10 years ago

Every week media divulgates certain interviews of some "RE Experts". Past has shown that in this field very little or even no one is expert and I cordially invite to read comments released a year back on today's predictions. Not only this, but there is another factor. Dubai is no more a single city entity. The various development offer so different Real Estate solutions that we cannot compare one another. For instance, can we compare The Palm to Emirates Hills? Can we compare Mirdif to Old Town? Or Dubai Marina with JLT even if just accross the road? These are all different developments and don't follow the same devaluation. Some went down over 60% (and are still high), others didn't yet reach 40% devaluation. This is why I believe this article may have some ground but far from betting on its prediction in better or worse.

Paolo C 10 years ago

Let's be more specific. 500 or more projects are not cancelled but on hold simply because an official cancellation, promised by Rera in May 2009, would give rights to investors to ask refunds of the monies paid. Prices might overall fall, however some areas will see an increase like Dubai Marina which is at the moment the only freehold area almost completed, the most sought-after and a few other top areas.

John 10 years ago

Pundits on the subject of Dubai are two a penny, yet almost nobody has been consistent about property and where it is heading. There is too much stock, there are too few buyers, there is no ready financing and the industry is in ruins. But there are gorgeous properties to be had, with wonderful fittings and features, and they are cheap now by global standards. The only problem remains the visa and residence issue. A week in London and the snow would make anyone sane leap at a place in the Marina or on The Palm. Just give us a piece of paper that says we are allowed to live in the property we bought, and the airport would be too small to cope.

Bob 10 years ago

AB, it is your journalistic professional obligation to print the truth and only the truth no matter what the subject matter. You are deficient regarding that. Whats the point in being a journalist/reporter if you can't report the truth. Oh, I forgot we don't have FREEDOM OF THE PRESS HERE

anee 10 years ago

Let's compare apple to apple , 'your report' conjectures that ''Rents in Dubai are poised to fall 10 percent in 2010 and to remain flat in 2011, but four out of 12 respondents expected rents to fall 15 percent or more in 2010 while three saw prices rising in 2011. As reported ( read as typed) by your reporters ( read as typist) said it is stable based on real data. It is funny to say the least to read AB now a days very often.

Telco guy 10 years ago

I am glad somebody raised this issue. AB position then is publishing any report from any company, without validating their accuracy nor performing any kind of analysis. Is this right? I am asking because then we have a very different concept of journalism but is good that at least there is some clarity here. Thanks

petrometro 10 years ago

It could be the Daily Mail in the UK, USA Today, The Tornto Sun or any other national daily tabloid. No sense of corporate pride or reputation value, just print copy to sell papers. Little wonder that advertising revenue is going to new social media. These papers are desperate, with few exceptions, they being the Financial Times, Daily Telegraph, New York Times and so on. Wake up. Your mere existence is at stake. Jamal Paolo and Nick are spot on. Get Real!!

Paolo C 10 years ago

To take the part of AB 1) no one is forcing you to buy a newspaper 2) it's a readers responsability to make out what is written or what someone has predicted 3) if anyone had the truth in his hands you think he would waist time pubblishing articles? Keep on going AB.

Omar 10 years ago

can not add more.prices of dubai properties should drop 30% more to be reasonable by develpoed countries standards. they do not make much sense.

sandman 10 years ago

Come on AB - who were the analysts, from where, and why should we believe them? Eg: 3 were from a Dubai bank with heaps of mortgages talking up the Dubai market 2 were from Abu Dhabi Banks talkin down Dubai, but talking up AD someone from Qatar talking down UAE but up Qatar. A real estate broker talking them all up, a guy from Moodys talking them all down. Heard the phrase "talking your book"? Let us know who these luminaries are, doing what, from where in a real report so we can make a call on this "information" provided. Otherwise we can get these sort of "headline sound-bites" from all the ohter rags in the region