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
By Ed Attwood
Wed 06 Apr 2011 12:59 PM

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.”

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