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Wed 6 Apr 2011 12:59 PM

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Dubai real estate could fall ‘up to 30%’, analysts say

Analysts say oversupply squeezing prices, Emaar could face pressure from mall rents

Dubai real estate could fall ‘up to 30%’, analysts say
Dubai real estate, Dubai Marina, Dubai property

Property prices in Dubai are still nowhere near the bottom and are facing up to a 30 percent fall in value, according to Gulf real estate stock analysts.

“House prices in Dubai are likely going to slide downwards for the next two years as oversupply continues to build,” Rasmala Investments senior real estate analyst Saud Masud told Arabian Business. 

“I would put that number at around 25-30 percent downside on current levels. This may add to downward revision risk pertaining to rents from mall tenancy to residential occupancy.”

Masud said superdeveloper Emaar could come under pressure, as short- and medium-term leases at Dubai Mall – where rents are higher compared to other malls – come to an end over the next three years.

Dubai's property sector was hit hard by the downturn, with billions of dollars worth of projects put on hold or cancelled amid tumbling real estate prices.

Speculators caught with multiple properties and little chance to turn a profit fled the market and defaulted on purchases, while other buyers continued to honor their contracts, often paying installments even after work was halted in the aftermath of the crisis.

About 50 percent of Dubai real-estate projects were cancelled or suspended after the crisis, the government said last year.

Another Gulf-based real estate analyst, speaking on condition of anonymity, said that both rents and prices would be hurt by the 25,000 residential units that are scheduled to come online this year, and put the potential fall in values at “between 10-15 percent”.

Dubai’s Real Estate Regulatory Authority (RERA) is currently undergoing a review of about 90,000 units that are due for delivery over the next five years, with analysts predicting most of these properties will be cancelled.

“Are we going to go back to those days where we saw large pipelines being built up and unfeasible projects? No, that is extremely unlikely and we are still feeling out the effects of recent sector consolidation and restructurings,” said Chet Riley, an analyst with Nomura Securities. 

“Ultimately those projects which RERA is currently reviewing will be cancelled and some of the new initiatives – government-guaranteed projects - will help support the sector in Dubai, but we see limited growth prospects over 2011 and 2012.”

Albert Ng 8 years ago

This is a long-predicted concern on Dubai real estate - we discussed and mentioned that all properties will declined by 40% to 50%. The current situation is not at its bottom yet. 30% as mentioned by analysts is optimistic...please be realistic and the overall situation could be better and faster resolved. Dubai is way over supplies of residential and commercial properties.

Valerio Rossi 8 years ago

Every day some analyst invent some bad news to destroy the reputation and the potential of Dubai.
I know exactly the situation and I think that now an investor has a great opportunity to buy a unit in Dubai.
Dubai is not died!
It's only at the first step. When the investor discover this point, probably it'll be late!
Please don't study and analyse so much the market because the market lives independently from the report. Fortunately!
Have a good day and enjoy!

jeff 8 years ago

i am following the real estate situation of Dubai and can say that the time has come for the investor . go for ready apartments , the price can drop but it depends area to area. for example the well developed community where the construction is done and people are living , have very less chance of price to go further down . i have a feeling that by end of 2011 , the price should be stable and will take gew more months to start picking up. The appreciation will start not before Q2/Q3 2012 and it will grow not like before. i think one can invest in a good community in next 6 months , this is the correct time to get very good price and one can still ask for good discount . after few months it will be late ...
best of luck !!!

Jim 8 years ago

Now is the right time, all depends where you would like to buy/live.
Prices are stable in well developped areas such as Dubai Marina/Downtown... but you better invest in a property build by one of the major developpers Emaar, Dubai Properties...
If you are planning to buy in areas such as Business Bay, Mirdiff, Discovery Gardens, International City, Jumeirah Village... you better wait as in these areas prices are likely to continue to fall and here another 30% fall may be realistic...

JOSHUA 8 years ago

Reality on the other hand seems to functioning otherwise ,these predictions are almost as good as a soothsayer's ill intent.One should question the source of these information or analysis while really validating the basis of these predictions.What was "good" earlier was just too good or unrealistic and the same analysts were complaining then on exactly the opposite and now that the prices have come down to being simply normal or justified,the analysts are predicting otherwise.Its time people grow up and appreciated what has happened out of this small City called "Dubai" that has grown in such a short span of time that no analysts could have even dreamed about.They way Dubai has embedded itself in the global arena by no means can be uprooted .

SA 8 years ago

After thousands of investors has burnt millions of dollars in this market, why are you recommending a buy?

The problem here is not about price or quality, but purely law(lessness). The legal framework to protect the investors is not there at all. Rules are changed every day to suit developers.

Investors know about cyclic nature of real-estate, but here the investment can land you in jail or create a mess of you.

Investment Pro 8 years ago

I have made a lot of money in real estate in the past, in different parts of the world, and Dubai sounds like a good play now.

Oil prices (very high), safe haven, replacement cost considerations make Dubai very attractive for investors.

I would recommend only good locations like JBR, Dubai Marina and Downtown area.

Remember, buy when people are fearful. Besides, rental incomes and capital gains are all tax free, unlike the US, UK or even Singapore.

Jon 8 years ago

Supply and demand suggests otherwise. Currently both office and residential units are at about 50% capacity. There is no one coming in to the market to buy or rent as no jobs are being created, and there are thousands more units coming online this year.

Take it from someone that lives here, hold on to your money. Dubai is not dead, but it is in need of resuscitation, that is not coming for a while yet!

gaja 8 years ago

Jim,

Never make a bet ..
if you cant repay the debt :)

especially if u r betting someone else's money.

Abdulla 8 years ago

Dubai still have debt to pay on 2012 billions of dollars so the market might hit the botom in 2012 decreasing like 40%

The market will grow steadly and will never reach the prices of 2008.Its a fragile market and the law doesnt help a lot so think twice before you buy.