By Claire Ferris-Lay
Will prices jump or tumble in 2012? We polled the region's leading real estate analysts to find out
Sections of Dubai's battered property market could show some signs of recovery in 2012 but the release of new supply coupled with wider global economic woes will seen an overall decline in prices, an Arabian Business poll found.
Well-established communities in Dubai such as Emirates Living and Downtown Burj are expected to see house prices rise by 5-10 percent, a survey of real estate analysts found. But property prices in less desirable locations such as International City and Dubailand could decline 3-10 percent, leading to a marked two-tier property market in the emirate,the poll found.
“Prime developments or locations have in the last year enjoyed some moderate price and rental appreciations and we expect this trend to continue through 2012,” one analyst said.
“For the secondary developments we expect prices and rental rates to soften further as more supply comes onto the market in 2012.”
Analysts polled said average prices in neighbouring Abu Dhabi could fall up to 10 percent amid increased supply. Analysts expect an average of 19,716 units to come on to the UAE capital's market this year.
“Prices will fall in Abu Dhabi this year in the region of 5-10 percent. The emirate is going through the same problems as Dubai did in the past,” said one analyst.
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, have declined 60 percent in the wake of the global economic downturn.
While prices in Abu Dhabi fared better during the crisis, analysts remained concerned about the significant supply of high-end homes scheduled to enter the market.
Several Dubai-based developers have turned their sites to midmarket housing in a bid to fill the gap left by the collapse of the emirate’s housing bubble. The year ahead will see an increasing number of developers look to develop affordable housing projects but these could be hindered by the rising cost of land and declining house prices in the GCC, analysts said.
Analysts’ opinions remained split regarding what they considered the biggest challenge ahead for the UAE’s property sector. Excessive supply and the impact of Europe’s economic woes were cited as he biggest concerns, alongside a lack of clarity in Dubai’s regulatory environment.
Considering the Microeconomics all these analysis sounds good and true, however getting the macroeconomics calculation in our analysis we might see another 20% or more decrease in prices due to geopolitical issues in the region.
no doubt these are the same analysts that got it so wrong last time around!
With the kind of negative publicity and insecurity Nakheel and Emaar are creating it does not instill confidence for the future of Dubai real Estate.
Building yet more Islands of sand will not hack it either whilst existing investors are attempting to get out as fast as possible before their investments erode entirely
The fact that there will be a considerable amount of property on the Palm Jumeirah coming on to the market as a backlash to the service fee and beachclub debacle, probably at knockdown prices will push prices down elsewhere. The difference between off-plan buying price plus the amount owners would have paid in rent, leaves significant leeway to get the asking price down. Same at JBR given maintenance issues, no beachclub for a while etc. Main benificiary as some rightly point out Emaar projects, given that they have also been seen to pay out a refund plus interest for a non-delivered property recently.
However, the intensely volatile geo- and socio-political situation in the region will above all else keep the housing market depressed, otherwise the safe haven effect would have begun to pay some dividends. Double digit drop in prices therefore still on the cards because of this, plus now more serious doubts about economic health in the Eurozone pushing China to its domestic markets.
There is simply too much supply in the market and more is expected. Prices are definitely not going up for the foreseeable future.
The biggest challenge in price recovery is reported as the supply demand imbalance. This imbalance would remain, as long as the authorities sit ignorant or act on slow pace on the violations that 4 bedroom room villas in Dubai still accommodates 14 or more couples/ families, 1 bedroom apartments accommodates 12 to 20 persons and so on.
Seems like only the positive feedback in being published here so I'm going to say we see a huge bounce this year with 20-30% gains lol.. Bearish comments are not being posted due to editors here silencing opinions. The DFM did not bounce or rally for the last 5 years so why would the real estate market be any different? Locals laws need proper changes in order for the real estate market to recover and bounce back. If none are addressed or fixed the real estate market will never rebound just like Dubai's Stock Exchange. This does not require Newton Einstein to predict.
Dubai property market is one of the most transparent markets in the Middle East and North Africa (MENA) region, but there is still more room for improvement.
According to the Jones Lang LaSalleâ€™s 2012 Global Real Estate Transparency Index, Dubai property market is leading the region as far as transparency is concerned and Out of 97 property markets worldwide, the property market in Dubai was ranked 47. The ranking was created keeping different factors in mind including market fundamentals and steps taken by government to regulate the market and ensure transparency.
The Dubai property market will perform better in future due to the successful bid for expo 2020. The rents and prices will increase at a greater rate. I think it is good time to make an investment in Dubai real estate and property market. Thanks