By Shane McGinley
Weak demand and increased supply likely to hamper real estate sector in H1 2010.
Property prices in the UAE’s northern emirates have fallen by more than half from their peak in 2008, according to a report released on Sunday by real estate consultants CB Richard Ellis (CBRE).
“2009 has been a challenging year for the northern emirates as reality returns with a bump amid severely pressing economic conditions,” the report said.
Ajman and Ras Al Khaimah have seen both seen major decreases in prices. “Both Emirates have experienced major pricing slumps with values plummeting over 50 percent for some off-plan properties,” CBRE’s research found.
In Ajman, residential prices averaged over AED5,900 per square metre in the second half of 2008, but this has now fallen 27 percent to around AED4,300 per sq m. Residential prices in Ras Al Khaimah have not fallen to the same level and are now averaging AED6,700 to AED 7,800 per sq m.
The rental market has also declined and average rates have dropped by around 29 percent since the first half of 2008, the report found. Prices of one bedroom apartments were the worst hit, with declines of around 34 percent over the same period. The report says that landlords are now offering incentives, such as free rent period and free parking, to try and attract tenants.
“The recent migration of residents back to Dubai is having a significant negative impact on the residential market of the northern emirates, dragging lease rates down and pushing vacancy rates up,” the report observes.
CBRE forecast this trend is likely to continue during the first half of 2010 with weak demand and increasing supply continuing to be problems in the northern emirates.
Agents in Sharjah also told Arabian Business recently that real estate sales in the emirate are “virtually non-existent” and that rents have dropped by about 30 percent from their peak.
Kosta Giannopoulos, manager of residential sales and leasing at Better Homes Sharjah said “sales transactions were always fairly low as you couldn’t buy freehold.” While there are still a number of sales to GCC nationals, the market is now “virtually non-existent."
“It’s been worse in Sharjah as people simply stopped any property purchases,” added Natalya Shapovalova, a sales and leasing consultant at the same agency.
Financing has been an issue and Shapovalova said that some banks are now not even lending to GCC nationals for property in Sharjah.
In terms of rental levels, landlords have been slow to reduce rents in line with the downturn and, as a result, are losing tenants, said Shapovalova. However, she points out that rents has fallen by about 30 percent from their peak.
I wonder why landlords don't just drop rents, what are they waiting for. This time round there will be no mass migration of people coming in from foregin countries to settle down , buildings will remain vacant for many years to come. if you walk thru Quasis every building has a tolet sign. The writing is on the wall , lower your rents and at least encourage people to bring back their families, at the end of the day it's the middle / lower income segments who will bring in the numbers and get the economy ticking back again.
Rents in Dubai are still on the higher side. A standard 2 bed room hall apartment with approx 1000 sq ft and without pools and jacuzzi must be not more than Dhs 35-40000. Dubai will be healed economically when the rents come down to the rock bottom level in a realistic manner. It is time now for landlords to revise their greedy outlook of the property market. Thanks