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Tue 21 Jun 2011 12:45 PM

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Experts split on talk of Dubai real estate recovery

Knight Frank sees slight rise in Dubai house prices, but analysts dubious of recovery

Experts split on talk of Dubai real estate recovery
Villa, rent, home for sale, real estate, property
Experts split on talk of Dubai real estate recovery
Experts split on talk of Dubai real estate recovery
Dubai real estate, Dubai Marina, Dubai property

Dubai’s embattled real estate market is showing signs of stability amid a global stall in the growth of house prices, real estate consultancy Knight Frank said.

The Gulf’s worst-performing property market in the last three years has seen house prices rise 2.1 percent since October, with a modest 0.6 percent increase in the first quarter.

By comparison, global house prices rose just 1.8 percent in the year to March, the lowest annual rate of growth recorded since the last quarter of 2009, the consultancy said.

Half of the 50 countries in the Knight Frank Global House Price Index were flat or saw negative growth in the first quarter, compared with just 18 nations a year earlier.

“The Middle East provides an improving picture,” said Liam Bailey, head of residential research at Knight Frank. “Dubai has seen price growth regain positive territory in the last six months and the consensus is that the market is stabilising following the volatility observed in 2008-2010.”

The index echoes the findings of consultancy Cushman & Wakefields, which said last week that real estate in the Middle East had seen a 15 percent rise in investments from overseas buyers.

The company said prime rents across all sectors in the UAE were beginning to stabilise following months of declines, with the region re-emerging as a real estate investment destination amid widespread political unrest in the Arab world.

Dubai, the worst-hit property market in the Gulf, saw house prices more than halve in late-2008 as the financial crash wiped out project funding and brought a halt to its real estate boom.

Real estate sales have plummeted since the days of Dubai’s property bubble, when speculators frequently bought yet-to-be- built homes and sold them at a profit before a single brick was laid, but the emirate continues to struggle with the legacy of oversupply in an already glutted market.

Jones Lang LaSalle estimates that 54,000 homes will come onto the market in Dubai from 2011 to 2015. That’s about 15 percent to 20 percent of the existing supply, according to Jesse Downs, director for Middle East and North Africa at the property broker.

Global analysts remain divided on the state of the trade and tourism hub’s real estate market, with many suggesting house prices have further to fall.  

Earlier this month, Deutsche Bank said Dubai property prices continued to slide and that political instability in the Middle East had failed to give the market an expected boost.

“Despite talks of renewed interest in real estate following regional unrest, there is no visible sign of an improvement,” analysts wrote.

“Even if we believe the worst of the downtrend is now behind, new supply, lack of homebuyers’ appetite and anemic transaction activity point to further weakness.”

Tarik El Mejjad a London-based analyst for Nomura International, said last week that, while there was a gradual increase in UAE mortgage lending, the market is far short of a real recovery.

Dubai said it had cancelled 217 property projects as of May 31 after completing a review of the industry in the past two years, in a bond prospectus filed on the London Stock Exchange earlier this month.  

The total value of property sale transactions plunged to AED119.5bn at the end of last year from AED152.9bn a year earlier, it said.

Mustafa Johnson 8 years ago

I have on many occasions tried to bring to the attention of your readers , that Dubai real estate market has changed .

We no longer have distressed sellers. Sellers are now in fact increasing prices in areas such as Downtown , Palm Jumeira and Dubai Marina .

Properties in good locations are very hard to come by .

Ask us , those who wish to buy .......

Red Snappa 8 years ago

How can that be, at least three times a week we read about some quantity of new housing stock coming on to the market, developers can't stop they need the final payments from existing buyers, even if the buildings or communities are half sold. RERA will of course let them do that.

Latest is Nakheel's Al Furjan, 3 types of villa and two types of townhouse split over 4 villages that's 297 units in all, 63 will be handed over first up. There are a significant number of other developments to be handed over this year including hopefully Jumeirah Golf Estates.

As owner occupiers move in that reduces the rental tenant pool so the vacancy level rises and increasing oversupply reduces the individual value. Also if the housing market is declining in Europe, foreign investors are more likely to buy there where the regulation is a lot stronger. Remember there are a huge raft of disappointed investors out there looking for their money back in the absence of any chance of a property.

ihsan chowdhary 8 years ago

I fully endorse your assessment and normal people must be careful before falling into trap of paid property commentators and experts

Red Snappa 8 years ago

Mustafa, Just posing a question are the asking prices going up as opposed to what you are obviously prepared to pay for them as an investor? If so is that because, while vendors would like to sell they are not in such dire financial straits that they are prepared to accept negative equity?

Also what about the 200+ foreclosures yet to be auctioned by lenders, one assumes they dare not release that tranche into the market otherwise the prices may lose more than the current average of 1.3 % per month. Also to be taken into account, there are a lot of properties that lenders are shying away from repossessing, because they will only add to the auction list and depress the balance sheet.

Dubai Marina is mixed messages, I receive emails everyday offering me 1 beds at 820k and 2 bedrooms at 1.1 to 1.2 million, they may not be in the crème de la crème buildings but that is a decent price.

Delivery is starting to gain momentum again as developers crave final payments exacerbating oversuppl

Omar 8 years ago

Interesting to note that the debate is now "has the market stabilised or not? Are prices in the better locations increasing or not?"

Well this tells me the sitution is far better from the time that prices plummeted 60% !!

My opinion is yes overall the market is reaching some sort of stbility. I do think however that in 24 months we will still be asking the same questions...do we see recovery or not? This implies very little movement in vlaues over the next 24 months.

Bad times are over...but good times are still a long way to come!

Telcoguy 8 years ago

There is a suspicious correlation between firms claiming the worst is over and firms making money selling property. We have seen this for the last two years.
In case you are interested, the ones who do not make their money selling properties have not shifted the debate to any "price increases"

Just need to check this same website to see how the question is still only about price decreases.
http://www.arabianbusiness.com/uae-property-prices-set-slide-further-10-20--406873.html

And btw this is not a bad thing in itself (yes it is bad for current owners), a much more damaging situation is when prices do not decrease as is the case in Spain. That blocks any possibility of recovery.

rey kardoso 8 years ago

How can people say that the RE market is stabilizing when there are negative equities spread galore all over the place? Banks are just starting to conclude restructuring deals where haircuts are the rule than the exception? There are no reports of opportunistic value investors picking up the so-called premium-located properties (are the chinese doing that elsewhere like in the USA or London?). Let's face it, it's anybody's guess at this point in time, yet.

Telcoguy 8 years ago

Omar, please go and check today's report on palm jumeirah prices sinking.
maybe a little bit more of a pragmatic and realistic approach . Just a thought.