By Andy Sambidge
Dubai investment bank says rising oversupply of property will drive decline over next two years
House prices in the UAE are set to decline a further 25-30 percent this year and next due to a rising oversupply of property, investment bank Rasmala has said in a new report.
Analysts said they saw depopulation risk and supply and demand issues as "key headwinds" facing the country's real estate market.
"We believe the UAE property sector is undergoing mid-cycle dynamics; house prices have corrected by 45-55 percent, but rising oversupply could see a further 25-30 percent drop in the next two years," Rasmala said.
"While supply dynamics may be somewhat different for Dubai and Abu Dhabi in terms of volumes, their demand dynamics almost mirror each other – a low appetite for new housing as financing remains tight and negative equity concerns linger," the report added.
“The good news is that much of the property correction is already accounted for.”
Dubai property prices slumped 62 percent from their peak in mid-2008 after the global credit crisis caused mortgage lending to dry up and speculative demand waned, Deutsche Bank AG said on February 14.
In neighbouring Abu Dhabi, prices slid 45 percent, Jones Lang LaSalle estimated.
The fall in housing price based on current supply and demand is not the real thing, since three times more housing whose construction came to a stand still are still standing in that half complete state or in many cases in a flat ground state where the first brick yet to arrive, while 60 % money has already been paid by the banks to the builders at that inflated rate on behalf of the buyers from whom the banks since early 2008 are collecting heavy interest on loans extended, while the first mortgage payment has not even started as ready possession of the property is a far cry from being handed over......Hence the scale of fall reported only pertains to the ready properties, while the deflated bubble in a rubble state all around it forms the other part which is not reported here or accounted for in terms of price fall and time of recovery......The above factor if included in the calculation would put the price fall by 80 % and the time for recover beyond 8 years.
and breathe....ever heard of a full stop! :)
It all depends on location, location, location. Jumeirah Village....probably will fall....the Lakes...probably not....Dubai Silicon Oasis.....probably will fall....Arabian Ranches....probably not....these talking heads should not be given much credibility.
The time has come for flight to quality. Location will always be important, and I agree with Original Joe that the prices may fall further in JV, DSO and in the desert, but not in Dubai Marina or Lakes. Similarly there will be further decline in prices of low quality and poorly managed properties. It will be interesting to note that premium for quality is evident from the fact that at Dubai Marina annual rent for one bed apartment is only 50k in a rotten poorly managed building and a good well managed quality condo next door is going for 90k. The difference is really huge and that is what is known as quality to flight. The property prices will also follow the same pattern and we will see it surface now as the properties have been delivered and the quality becomes very obvious in the very first year of use. These talking heads have already lost their credibility and they are only interested in publishing their names and free advertisement of their companies.