By Anil Bhoyrul and Ed Attwood
Distress sale of three-bed apartment pushes value below $200 per square foot.
Sale prices on Dubai’s Palm Jumeirah have fallen to their lowest level in over three years, with a three bedroom apartment on the prestigious Shoreline changing hands for just AED1.55million ($422,000).
Arabian Business understands the property is one of a number of new distress sales that have come onto the market in the past six weeks – effectively pushing down the lowest selling price to just AED704 ($191) per square foot. This compares to a peak of over AED2300 ($626) in 2007.
Since the start of the property crash in late 2008, prices have now fallen by nearly 70 percent in some parts of the Palm, though across the development the average drop is believed to be closer to 40 percent.
In May this year the Arabian Business Think Tank forecast that prices on the Palm Jumeirah will plummet another 20 percent in the next year. It predicted that average prices for an apartment on Nakheel's man-made island will fall to just AED1,022 per square foot by May 2011.
Meanwhile the latest data from real estate consultancy Colliers said that house prices across Dubai fell by four percent in the second quarter, according to the latest data from real estate consultancy Colliers.
The agency last week said that this was the first quarter-on-quarter contraction to be reported by its index in twelve months, adding that “forthcoming housing supply and declining rental incomes are likely to put downward pressure on house prices moving forward”.
Colliers had previously reported that its index had risen by two percent in the first quarter in comparison to the final quarter of last year.
The consultancy is predicting that around 33,000 new units will be released onto the market by the end of the year, less than its original estimate of 41,000 due to project delays or rescheduling.
“There are already more than 340,000 residential properties in Dubai with an average occupancy rate of 87 percent, with further declines anticipated,” said Colliers International’s regional director, Ian Albert.
“The market simply cannot absorb the additional supply unless the population grows and/or the release of stock is slowed down.”
Albert also warned that a dramatic drop in rents made home ownership a less attractive option for investors in terms of income generation, another factor that was weakening demand.
The report also indicated that rigid mortgage approval processes from cautious banks meant that access to finance for some buyers remains limited.
Colliers’ index is compiled using actual mortgage transaction data from a consortium of financial institutions. The data also shows a seven percent increase in overall house price values year-on-year, and the total number of property transactions rose by fifteen percent quarter-on-quarter.
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How can this be ? Dubai is state of the art economy and how can this ever happen to Dubai ? Investors don't worry as this is only book loss. Holdon tight... We are on a roller coaster ride.
$422,000 US for a 3 bed apaprtment is still too expensive. Just think what you can buy in the UK for that amount with the house prices there falling again. I dont care whether that price is on the Palm or not. $300,000 is a more realistic price for buyers
In related news, houses on the Palm Jumeirah have also physically sunk to a three year low as well - as the sand gets washed away!
There are many reasons for the colapse in Dubai. However, one of them is denial which you obviously suffer from.
Indeed we are on a roller coaster ride. I would like to offer you my property on the palm for $800 per sqft. Pls take it and hold on to it, it wld only be a book loss for you.
Not surprised at all... there is much higher dip expected at the end of third quarter as summer break is an opportunity for people to migrate / send family's back home.. I'm optimistic these figures will turn around with the start of first quarter 2011...
PJ is a concrete jungle, an architectural eyesore, I cant think why anyone would want to live there.
THe whole property boom was built on Developers delivering what they promised - 50% of the projects in Jumeirah Village will never be built = over 100 mini towers, this suits the current supply and demand curve Dubai is facing. However the lack of Governemnt support in prosecuting these fraudsters is keeping overseas investors away as word spreads internationally. Most importantly the change in residency visa's from 3years renewable to just 6 months makes the UAE unattractive especially if you have a family. Ajman recently appealed to Abu Dhabi to reverse their decision but this has fallen on dear ears. The word "Self inflicted" springs to mind.
Great time to buy now and over the next 3 years. The property values will continue to go down highly likely until 2013, but it is difficult to spot a bottom. Keep looking for value and invest in a home or a rental property if your investment horizon is ten years and beyond. Dubai will go places, but don't hold your breath on selling and making a bundle in the next few years.
The whole real estate run from 2002-2008 was based on the trust that the promises will be delivered. And yes, they started delievering since 2004 onwards. But, lately there were U turns like VISA issue. Secondly, when investor or buyer defaults over payment there are serious implications, but when developer delays or don't deliver there is no recourse available. I support the view that buying property should not guarantee the VISA, but if a person is willing to come clean on occupation, health and security grounds - is asking right to residency for 3 years is too much?? A labour investing nothing in the country and sending all his savings to home gets to stay 3 years in the country. An investor, putting his life savings and building his life around the country is permitted to stay only 6 moths? It's no more about the propery prices, it's about the respect that you offer to an investor.