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Wed 8 Oct 2008 02:02 PM

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UAE commercial property market slowdown

Dubai and Abu Dhabi both witness slight drop in activity during Q3, Better Homes says.

Commercial real estate markets in Dubai and Abu Dhabi witnessed a slight slowdown during the third quarter, with trading in August and September relatively flat, realtor Better Homes said in a report on Wednesday.

Better Homes put the lack of activity in the markets down to a seasonal slowdown and the Dubai government’s ongoing corruption probe, which it said had “tainted a negative picture on the real estate market”.

Better Homes said sales had also been affected by a new mortgage law that had made it harder to obtain finance and restrictions on immediate resale of properties by certain developers, which was “starting to push the speculative investors out of the market”, it said.

Demand for office space in Dubai outpaced Abu Dhabi during the quarter - especially in areas such as Meydan, Jumeirah Lake Towers and Dubai Waterfront - but Dubai was starting to show signs of distress among short-term investors, Better Homes said.

It pointed to an example of a commercial building in Nakheel’s Dubai Waterfront development being sold for a negative premium and warned of these sales were likely “as global markets squeeze liquidity and local banks reign in access to debt finance”.

In Abu Dhabi, Better Homes said the sharp increase in office rates during the second quarter post Cityscape Abu Dhabi did not continue into Q3 and prices were mainly flat for the quarter.

It said demand had shifted from Al Reem Island to Al Raha Beach, where premiums offer more upside potential.