Wednesday, October 29, 2008

The six-year property boom in Dubai may slow down, fear agents

The six year property boom that Dubai witnessed has almost ended, with the sales collapsing amidst fears of global economic downturn, reveal agents.

"Last month was the worst, a real disaster," said Mehdi Zoghbi, a property agent at the Middle East Real Estate Consultants, who spoke to Zawya.com.

The sellers are desperate and are now offering their off-plan properties on the secondary market for zero premium, despite the loss on investment, just to offload quickly, it is said.

Dubai, being the first emirate to permit foreigners to purchase homes, will also be the first to see a drop in property prices, with the global credit crunch and region's prospects undermining investor confidence.

According to a property agent at Al Jabal Real Estate, the commissions have dropped by 70 percent currently. Dubai needs to apply caution to curb the practice of "flipping" property and payment of "key money" to reserve real estate, the agent said.

However, the biggest developers in the city, such as Nakheel and Emaar are confident that sales will remain robust. The Chairman of Emaar, Mohammed Alabbar, in his statement, expressed confidence about the fundamentals and future growth of the company.

Despite this, Emaar's stock has fallen 62 percent since the beginning of the year, which is more than 48 percent fall in Dubai Financial market's main index during the same period. Colliers International reported that property price growth in Dubai dropped to 16 percent during second half of the year from 42 percent during the first quarter of the year.

Even Morgan Stanley had warned a drop in prices by 10 percent in Dubai towards 2010.

A drop in property prices of Dubai, would also burden the Dubai economy further, considering the fact that it does not profit from the vast oil income otherwise enjoyed by its neighboring emirate Abu Dhabi. At present property and construction contribute to about 30 percent of the economy in the emirate.

The strong economic condition in the region which had supported the property boom in Dubai, too, has now been badly hit.

Considering all such factors, whether buyers would still continue to respond amidst the current depressing economic stance is yet to be ascertained.

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