By Shane McGinley
Tasweek CEO believes prices will plateau, unlike the dramatic surge and plunge seen in 2008, 2009
The rise of Dubai's fast-growing residential real estate market is likely to peak in 2015, but will not suffer the same dramatic pitfall seen in 2008 and 2009, a leading Dubai real estate boss has forecast.
“We do a lot of analytics and we do a lot of market research. We know that every eight or seven years there are some disturbance in the market and nothing can climb so rapidly,” Masood Al Awar, CEO of Tasweek Real Estate Development and Marketing, told Arabian Business in an interview.
“I think 2015 will be the peak but if we sustain it, [growth] can be prolonged to avoid the downturn… avoid the pitfall [of 2008],” he added.
While Property prices plummeted nearly 60 percent in the aftermath of the Dubai property crash in 2008 and 2009, Al Awar said such a dramatic drop was unlikely this time and growth was likely to plateau as the market was being managed in a more strategic way this time around.
“We have to make sure the pitfall is prohibited and we manage the cash flow and move forward. It is about sustainability and growth,” he said.
Tasweek Real Estate Development and Marketing manages a number of projects in Morocco, the UAE and Malaysia and is planning to launch a AED1 billion ($272 million) IPO in the fourth quarter of 2014.
Al Awar’s comments echo those expressed in a report last month by property consultants JLL, which claimed that growth in the Dubai residential market is slowing as government steps to curb speculative buying have an impact and higher prices start to affect demand.
Second-quarter trends in the market suggest the risks of the Dubai property market overheating and then crashing, as it did in 2008-2009, are easing, Craig Plumb, JLL's head of research for the Middle East and North Africa, told Reuters.
"It's good news that the market is slowing down," Plumb said, adding that when the market eventually reached the falling phase of its cycle, the pull-back was unlikely to be as violent as it was five years ago, when it triggered a corporate debt crisis in the emirate.
For now, the residential market is still climbing rapidly; average sale prices jumped 36 percent from a year earlier in the second quarter, compared to 33 percent in the first. Rents gained 24 percent, after 23 percent in the previous quarter.
But on a quarter-on-quarter basis, rises are slowing. Sales prices grew 6 percent in the second quarter, down from 10 percent in the previous quarter, JLL calculated. The increase in rents dropped to 3 percent from 7 percent.
Seeking to avoid another boom-bust cycle, authorities took a series of steps last year to cool the market. The United Arab Emirates central bank imposed caps on mortgage loans, and Dubai doubled its transaction fee on property deals.
Plumb said these steps were having an impact and in addition, market forces were at work as, with prices in many areas back near their pre-crash levels, some buyers started to question the affordability of prices.
While apartment prices have continued to rise, prices of existing villas in particular have started to lose steam, with anecdotal evidence of a drop in asking prices that looks set to continue in coming months, he added.
The cooling of the market can be seen in falling sales volumes for all residential sectors, with Dubai government data showing villa sales shrank almost 50 percent from a year earlier in May, JLL said.
Plumb said that while the residential market as a whole still had further growth ahead of it, and was unlikely to turn down for at least six months, it had entered a period of slowing rent rises that would precede a phase of falling rents.
Other parts of Dubai's property market - hotels, retail space and offices - are further back in the cycle and remain in phases of accelerating rental growth, the JLL report said.
High vacancy rates and plans for future supply continue to constrain the office market, even though rents have been rising modestly, the report found. Dubai remains one of the world's strongest-performing hotel markets, with average occupancy rates around 85 percent in the year to May.
Even Warren Buffet won't be able to predict how the market will behave.
Nothing more than a marketing gimmick!! property prices will fall significantly as these prices are not sustainable for more than 10 - 12 months.
This is another Housing bubble, awaiting a huge crash again.
Its apready peaked. Secondary market is very quiet with only those properties under AED1.5M (affordable) and above AED 10M (cash buyers) really have any interest. Most current sales are off-plan, though even Emaar sales are down and theyre the safest property developer for investment.
Im hearing tales of investors (speculators) having brought off plan end of last year and beginning of this year, now realising there is no secondary market to move their properties onto at a premium, let alone breakeven. This is magnified when you have brought 2 or 3 off-plan and now are faced with having to pay the entire amount.
Why is an investor going to pay a premium on these paper properties, when they can buy direct from the developer? An end-user cant get a mortage on it either, so its worthless.
The dung really will hit the fan soon for some.
Can't believe UAE officials are happy with unhealthy situation. This economy is chasing talents away because of overpriced housing , so how is this seen as a sustainable way of moving the economy?
The word of mouth this time will be something hard to beat with this kind of announcements.
The secondary market probably hit it's peak in January or February of this year. From then on in it has been all down hill. You just have to look at the data from the DLD on the number of transactions happening vs last year Dubai Marina down 60% vs last July, Arabian Ranches down 70% vs last July, Meadows down 65% vs last July and the lakes down 67% vs last July - Sames goes for the last three months even May for the lakes was down over 80% in volume vs May 2013 - Just take a look at the prices as well on DLD - no real transactions happening above 5M.
Everybody is waiting for a bounce in September but it's not coming - volumes will go up but prices will continue to track downwards - just too many developers released too much new stuff - it soaked up investor liquidity and took the air out of the bubble - only question now is how much air will be released.
I would much rather if AB did it's own research on the current state of the market instead of soundbites from property sales guys
It is very funny to read these articles on the news. So far I can't see any slowing down from the side of a tendant. Recently, after being 1 tear in my appartment, ask already for a increase of 20000AED, I was looking for an alternative. Looking for an alternative in the area of 3 bedroom is devasdating. Believing that I am earing quite good money from one of the biggest employer of the region, I find my self in the situatuion that it becomes almost impossible to find relative good quality appartment, in so call it sencond area east of sheik zayed road. Beside of all this i looked into the rent index of rera to have an overfew of what can i expect if renting a new place to stay. Thats the result:
Marina Pinnacle Tower (3 Bed) offered for 150.000AED, in an area where the index is allready 190.000 to 230.000 in is increased in the month of JAN to a 230.000 to 260.000. SO what can a renter now expect at the present rules. Exact: a fat increase of 27000 AED after the first year. Areas li
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