By Shane McGinley
Pockets of prime property will buck trend and post small price increases, say analysts
House prices in Dubai’s battered real estate market will
slide a further 15 percent by the end of 2011 as fresh supply floods an already
glutted market, analysts said in an Arabian Business poll.
The Gulf’s worst-performing real estate market over the last
three years has seen rents and prices more than halve from their 2008-peak, but
residential costs have further to go, analysts said.
“Average sales rates are likely to be down around ten to
fifteen percent, but this will vary by individual property,” said Matthew
Green, head of research at consultancy CB Richard Ellis.
Lower-tier properties are likely to be worst hit by an estimated
10 to 15 percent fall in rents, said Ian Albert, regional director Middle East
at Colliers International.
“[The lower tier] has been most impacted by the fall in
rents as a significant amount is owned by investors as opposed to owner-occupiers.”
His view was echoed by Michael Michael, Director of Landmark
Properties, who said prime properties would fare better amid an oversupply of
lower-tier real estate.
“Markets such as Discovery Gardens and International City
have witnessed the largest decline, while prime locations such as Downtown Dubai
have witnessed the least,” he said.
Oversupply continues to be a key driver behind falling rents
and prices, analysts said. Colliers calculated that around 13,000 units are due
to come online by the year-end, followed by a further 27,000 properties in
“Original estimates put considerably more [new properties]
in 2011,” Albert said. “However, there are delays in some of the phased deliveries
of the following projects, pushing them out until 2012 delivery; Jumeirah Golf
Estates, Jumeirah Park and Jumeirah Village South.”
Dubai said in June it had cancelled 217 property projects as
of May 31, following a review of more than 450 projects.
The emirate said it expected a further 237 developments to
be completed “in due course”.
The UAE federal government in June said it would offer three-year
residency visas to owners of properties worth AED1m or more, replacing visas
that require renewal every six months.
The move was seen as an attempt to lure investors back into
its struggling real estate sector, but analysts were divided on whether foreign
buyers would respond.
“The crux of this issue is whether or not buyers will
actually pay a premium just for the visa. This is unlikely because buyers are
value conscious, especially now,” Jesse Downs, director at Jones Lang LaSalle
MENA, said earlier this month.
Though the consensus was that house prices across Dubai had
further to fall, some analysts suggested pockets
of prime property would buck the trend and post small price rises.
“By the end of the year, house prices in the prime projects
- Palm, Marina, Downtown Dubai - will continue to increase at small levels and will
be higher than those prices of 2010,” said Priyesh Patel from Aston Pearl Real
“Prices compared to 2010 are definitely on the increase; not
huge, but three to five percent.”
A report by Landmark Advisory this week found prices of
villas in high-end locations had risen 2.8 percent in the last quarter, though apartment
sales had continued to decline.
On Monday, Dahi Khalfan Tamim, Dubai’s chief of police and
head of the country’s budget committee, urged Dubai to slow down the pace of its
real estate development.
“Dubai shouldn’t expand its real-estate sector as it did in
the past,” Khalfan said. ‘‘We should slow activity, and there should be a
So hopefully rent will go down further next year.
Unless of course rents become so low it is simply not worth the hassle for landlord - who have to pay the community charges (very high) and any maintenance.
There is no ceiling as inspite of all these reports the real estate agents are quoting unrealistic rents. They do not even consider the factors that effect the rent in a particular area vis -a-vis another. While I respect Mr Khalfans views.
Housing prices on these so called prime projects on the increase, not a chance- albeit i'm not one of the thousands of real estate experts in dubai
I am holding palm Jumeirah and it is up 30 percent this year.... And am finding it hard to buy properties as people are not selling.... Only apartment prices is down and everyone knows this... they need to clearly report their findings....Irresponsible media is to blame for half the price decline.
Got to say that with regards to finished property I guarantee you we are seeing the very start of a BULL run.
Finished property in established communities.
Nakheel is being fixed, service fees are being lowered and from what we have heard MAJOR incentives are being sped through.
Try making offers today in August/Ramadan -no bargains- This is it, and rents are marginally on the increase- unlike most comentators this is based on hard data.
Sit it out this Winter - there is going to be a BULL run and I am sad to say its going to be another steep curve.
I Know several large investors who are taking advantage of this "maximum" pessimism.
Finished properties are beyond their lowest point in the curve, but PLEASE keep talking the market down -
You are making it very easy for the emotionally detactched investor to clean up in Dubai.
100 % agree that what we are seeeing is the start of am upward trend- started mid 2011, and yes, its going to rally through 2012.
I bought in the Springs in April 2011, and my property has appreciated 20% already in 4 moths. These guys are all talk, not sure where they get their data from!!
A further 15 per cent is more accurate than an increase, as the world slides into secondary recession and more trouble brews in the MENA region.
For those owners under the impression that the prices of their properties have gone up, have you tried to actually sell them at that price! I am afraid prospective buyers will make you an offer that wipes any perceived increase away and then some. True you don't have to sell at that price, so they move on to the next one as they are not panic buying.
Remember, the gap between asking/listing price and realistic selling price is 15 to 20% anyway, then factor in the 25% discount a sharp investor cognisant of prevailing rental returns and that reduces your pool of prospective buyers to the more limited buy-to-live segment looking at a cheaper mortgage to save on rent.
Sorry to dampen your enthusiasm, but fundamentals are what counts and they are still in the process of correction as comparative property prices continue to fall worldwide.
That may be true, but the ability of a large investor to diversify and manage risk has absolutely nothing to with a person/family deciding to buy property.
I do business (and advise my clients) in places like Pakistan, Iraq or Afghanistan; it is true you can do business there but you need to be realistic about the risk, you need a high return rate and ideally you should be big enough to survive after being totally wiped off.
Honestly anyone claiming that the country risk in the UAE is low is delusional; as an (small) investor you lack any legal protection and laws and regulations can change without any notice. If you have the ability to control that risk better than the average investor then you are really on track to make some serious money. I know many people who think they have, and they may be right. I am just (naturally) skeptical and personally would only buy here at a hefty discount.