No recovery for Dubai real estate as prices slip

House prices in emirate still tumbling with no signs of market recovery, says Deutsche Bank
No recovery for Dubai real estate as prices slip
Dubai office space, buildings
By Bloomberg
Thu 09 Jun 2011 11:39 AM

Dubai property prices continue to fall and political
instability in the Middle East failed to give the market an expected boost,
Deutsche Bank said.

Home values declined 1.2 percent in May compared with the
previous month and rents fell by 1 percent, analysts Nabil Ahmed and Athmane
Benzerroug wrote in a note to investors. Apartment prices slid 1.3 percent in
May, while villas declined 1 percent.

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

Property prices in Dubai, the second largest of the United
Arab Emirates’s seven sheikhdoms, have dropped 64 percent from their peak in
mid-2008, while rents have fallen 55 percent, according to Deutsche Bank.

Revolutions that swept the Middle East and led to the
overthrow of regimes in Egypt and Tunisia prompted speculation that investors
would look at Dubai as a safe haven.

Asking prices dropped all over Dubai with the exception of
apartments in Palm Jumeirah, Jumeirah Beach Residence and Sports City and
villas in Emirates Living, Palm Jumeirah.

Prices fell 2 percent in Jumeirah Lake Towers, The Greens
and Arabian Ranches.

Rental yields were 7.6 percent in May, unchanged from a
month earlier and up from 7 percent a year ago, according to the report.

“Although the pace of decline has slowed of late, prices
have continuously declined for 18 months in a row,” the analysts wrote. “We do
not see an improvement in fundamentals that could trigger a recovery. The
supply overhang looms large, homebuyers lack appetite, transaction volumes
remain anemic, banks are cautious lenders and international investors are still
wary of U.A.E. real estate.”

Deutsche Bank maintained its “buy” recommendation on Emaar
Properties PJSC, the U.A.E.’s biggest developers, saying it has “superior asset
quality, strong recurring income, reasonable leverage and cheap valuation.”

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