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Sun 20 Nov 2011 12:30 PM

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Dubai real estate sales down 70% from peak

But data shows creeping rise in monthly deals from collapse of housing market in 2009

Dubai real estate sales down 70% from peak
House prices in Dubai showed signs of recovery in the third quarter, said JLL
Dubai real estate sales down 70% from peak
House prices in Dubai showed signs of recovery in the third quarter, said JLL
Dubai real estate sales down 70% from peak
House prices in Dubai showed signs of recovery in the third quarter, said JLL

Dubai saw less than 1,700 real estate deals in the first ten months of the year, government data shows, a 70 percent decline on sales made at the housing market’s peak in mid-2008.

Some 1,603 deals were signed off in the ten months to October, down from 5,363 during the same period in 2008, data from Dubai Land Department showed.

But the figures reflect a 37 percent increase in property transactions when compared to 2009 at the height of the financial crisis, suggesting fledgling signs of recovery in the city’s battered housing market.

The average number of monthly real estate sales is 160, up from 117 in 2009 but still a dramatic way from the average 536 property transactions seen a month in 2008, as off-plan properties were flipped multiple times by speculators.

“It reminds me of how truly extraordinary the market was from 2005-8, and how regular it seems to be today,” said Ryan Mahoney, CEO of Better Homes, the largest real estate firm in Dubai.

“We are operating in a market that has less than a quarter of the annual transactional value that it had in previous years and yet we are busy… and we even excited by the small spurts of growth we see from month to month.”

Charles Neil, CEO of Landmark Properties, said the rise in sales was attributable to an increase in bank lending and the increasing number of Chinese and Indian investors entering the market.  

“There has been an increase in liquidity in the market,” he said. “Banks are being more active in providing mortgages and interest rates on mortgages have come down from level of around eight to about six percent.”

Property prices in Dubai soared after the city opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments.

From start-2007 to mid-2008, prices rallied almost 80 percent, Morgan Stanley estimates showed, with billions of dollars worth of new projects launched by local developers.

But home prices in Dubai, the Gulf property market that had the biggest reversal because of the financial crisis, fell more than 60 percent in the wake of the global credit crunch.

House prices in Dubai showed signs of recovery in the third quarter, with slight rises in prime projects such as Palm Jumeirah and Arabian Ranches, Jones Lang LaSalle said in September.

But analysts remain concerned that the estimated 33,000 new homes scheduled to hit Dubai’s market by end-2012 could cause fresh declines in rental and sale prices. Renewed global financial woes and the European sovereign debt crisis are also likely to cause more pain, with Moody's last month predicting any price recovery to be delayed to 2016.

Andrew Goodwin, Dubai director of real estate consultancy DTZ, said transactions remained subdued as landlords fail to match their asking prices to new economic realities.   

“We receive significant interest from investors looking at the Dubai market but in many cases there is a discrepancy between the purchasers and sellers valuations which keeps volumes low,” he said. “Those sales that do go through are where the purchaser has a long-term confidence in the Dubai market.”

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Birdie 8 years ago

The headline '....70% from peak' is not surprising but obviously intended to grab attention.
What is noteworthy is that transactions are up 37% this year vis-a-vis 2009 .
This is how property bull markets begin.
And let me repeat -THERE WON'T BE 33,000 NEW HOMES IN 2012. NOT EVEN 10,000.

Red Snappa 8 years ago

The 70 per cent down from peak 2008 is highlighted because the article also quotes that while there is a lot more interest the gap between asking price and perceived value for money offer price is still too great, hence the transaction volume.

You have to convince everybody to sell at a almost negative equity to kick-start the market into full throttle. You will find that the real rapid turnover tipping point for transactions, will be when the market is officially more than 80% off 2008 peak. This is the serious investors 20 to 25% off asking price to ensure future capital gain.

However, the trickle of owner/occupier buyers is a positive change but increases the rental vacancy rate. Believe me you will need the investors with no desire to live in but to purely rent out back in droves to drive the market. The 80%+ off 2008 values is the key, especially as we have now officially acknowledged that the market value is 70% down on 2008.

There may not be 33k units in 2011 but 10k + a lot.

Silly Investor 8 years ago

Wait until potential investors realize how service charges are calculated by developers and how RERA blindly accepts them. It will dive by another 90%. The problem in Dubai RE is that the existing legislation is not worth the paper. What about Shorline, JBR and executive owners sufferings from greedy and rogue developers? what about the extra cost fo utilities or housing fees? this is the nightmare of every investor who believed in HRH vision. I know if you dont like it just leave. I am sure all investors are ready to leave the day they are reimbursed for the deleted projects.

Lee 8 years ago

And will keep falling as more people will continue to relocate to Qatar where the work is. We will see most companies start to relocate there regional offices to Doha over next five years leading to even bigger rent drops. With the ever escalating service fees which make any rental return minimal where is the incentive? The prices need to fall much further than now before they become attractive again.

Telcoguy 8 years ago

I think that is the most likely outcome. Right now there are only three serious candidates for the top spot as regional hub, Dubai, Abu dhabi and Doha. Dubai got a head start but only Doha and Abu dhabi have dry gunpowder. Abu Dhabi does not seem too interested, maybe they are bidding their time and anyone who thinks that all the development in Doha will be just to put a show for the world cup is going to get a surprise.
I think Manama will stil play a role as a gateway to KSA, but I doubt they can compete with Doha in terms of infrastructure.
Let see, too many cities trying to become a hub, clearly not all can succeed.

Andy 8 years ago

I see prices falling further. With new community fees and other expenses rising I don't see anyone rushing to Dubai to buy homes. The US just started issuing residency visas for those who buy property in the US for $500,000. They also don't need to pay the ridiculous visa fees that expats do in the UAE. If the UAE was smart, it would offer permanent residency status for those that buy property in the UAE and cut down on the fees that they are charging expats/non-locals. If proper steps were taken I could see Dubai prospering but under the current rules this is impossible.

Oli69 8 years ago

There is currently little or no work in Qatar. People outside of Qatar think that the country is booming but if you actually live and work in Qatar you will see that very few companies are hiring and the FIFA 2022 effect hasn't really kicked in yet. I reckon that 2013 will be the year when Qatar will get their act together and the country will finally start hiring, spurring the real estate market. It should also be noted that real estate prices in Qatar are significantly higher than in Dubai, almost 2008 Dubai levels, which will make it even more difficult to compete with Dubai. Without forgetting the poor quality of life in Qatar, the absence of freezone areas (that should however change in the next few years), and poor real estate regulation that should detract any investor wishing to invest in real estate. I reckon Dubai has the opportunity to develop further their infrastructure, provide clearer rules and regulations and will always have an advantage over competing GCC cities

stephen 8 years ago

These, actual figures from DLD, finally put paid to the myth that property in this region represents good value. The birdies of this world can squawk all they like but the simple truth as witnessed again through these figs is that people are not buying, asking prices are still too great and the whole asset class has been hyped up into something which it is not - important.

Worn platitudes from Better Homes and Landmark may soothe the cares of their respective CEOs but I suggest those comments are fooling nobody.

Let's not belittle the thousands of rightful claims from buyers who have been forgotten or ignored by a system ill equipped to handle the growth witnessed this decade. But 40 transactions per week I hope, helps put this market in perspective on a global scale. Simply put, it's not worth the newsprint.

ALI 8 years ago

AS LONG AS DUBAI AVOIDS ISUANCE OF RESIDENCY VISA FOR HOME OWNERS , THER WILL BE NO POINT FOR FORIGNERS TO INVEST .
WHO WOULD PUT HIS MONEY IN A PLACE HE IS NOT ALLOWED TO LIVE IN?

Telcoguy 8 years ago

Why don't you set up a company in a free son and get the visa much more cheaply?
I seriously do not understand this fixation, I would appreciate if someone could explain me. Is it about dependents and family members?