Dubai house prices will fall by up to 70 percent from their peak levels in the fourth quarter of last year, Swiss investment bank UBS has predicted.The Swiss investment bank said on Wednesday that property prices were more attractive than a few months ago, with developers offering more flexible payment terms too, prices would become even more attractive in the second half of the year.
“We believe the majority of investors would prefer to stay on the sidelines and revisit potential purchase opportunities in second half of 2009,” said a briefing note.
The note, written by analyst Saud Masud, went on to say: “As we move past the summer season and potential for expat exits picks up, there is a likelihood that rents begin to drop faster than home prices thereby compressing rental yields.”
Dubai residential property may trough at around AED500-800 per square foot, which is 70 to 57 percent below peak levels of around AED1,850 ($503.7) per square foot, the note said.
So far, prices are estimated to be down by around 25 percent, according to the report.
UBS described the recent bull run in UAE stock markets as unsustainable and downgraded property giants Emaar, Union Properties (UPP) and Aldar as a result.
Dubai based Emaar and UPP were downgraded to sell from neutral, while Abu Dhabi master developer Aldar was downgraded to neutral from buy.
It initiated coverage of Sorouh with a sell rating, citing near term lack of demand.
“We don’t yet see fundamentals improving, hence we view overall systematic risk as mispriced,” Masud said.
Residential vacancy rates in Dubai may reach 25 to 30 percent by the end of 2010 as a result of oversupply and a 10 percent decline in the city’s expatriate population.
UBS said it believed Dubai’s total liabilities currently stood at $112bn, which includes a $42bn cost to finish all residential properties.
The slowing real estate market will prompt consolidation among key developers among smaller ones, it added.
“In addition, we expect consolidation across the food chain including banks, lending institutions, media and advertising firms, contractors and designers,” Masud said.
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