Saturday, January 17, 2009

Dubai more vulnerable to real estate slowdown, than Abu Dhabi

The population in Dubai is likely to decline by 8 percent this year, due to recession in property sector, according to a new report.

The report, released by the UBS Investment Bank indicates a drop in population by 8 percent this year, which in turn would result in an oversupplied market, leading to 30 percent fall in house prices within next two years.

The researchers at UBS Investment Bank, in their report, mentioned that a slowdown in housing market, apart from the challenging macroeconomic conditions, may result in decrease in the number of foreign workers moving into the region for job purposes, and fewer investors being involved in local investments, including real estate.

With reduction in sales, property companies in Dubai, and in other emirates have been laying off staff, reducing marketing budgets and delaying projects. This in turn, has affected all major businesses, including construction companies, advertising firms and contractors.

According to the report, in case the property-related labour force dropped by 20 percent this year, and by 10 percent next year, this would result in a housing surplus of 87,000 units, which constitutes 27 percent of total stock in Dubai, towards end of the next year.

Such a situation would result in 30 percent decline or may be more than 50 percent decline, in prices, the report stated.

Dubai is getting more vulnerable to the recession in property sector, than in other emirates, mainly because of the major construction works happening here, and due to the fact that more than 50 percent of its economy is involved in property sector, the report said. On the other hand, its neighboring emirate Abu Dhabi is already witnessing an undersupply of housing, and the economy there is dependent on petrochemicals, and hence, may be less severely affected than Dubai, the report said.

The UBS researchers have recommended that the Dubai Government pass should pass regulations that make life easier for laid-off expatriates to continue their stay here, while looking out for new jobs, as maintaining expat population is critical for long-term property market and economic sustainability of Dubai, the report concluded.


sunil said...

ofcourse it is more vulnerable. just compare the rate at which dubai properties are build compared to abu dhabi. compare the rate at which dubai rents have increased compared to abu dhabi. these are all indications of the macro issue at stake here. dubai artificially was on the rise and must correct to mroe realistic levels supported by real estate market fundamentals. there is simply no sense to the chart of real estate prices/values in the dubai in the past few years. look for ongoing corrections for at least 24 months. this is just the start.

dubai propery said...

Its vlunerable like other cities in the world.Many cities had faced similar recessions and came out successfully.Prices of the property will raise once again

Toronto Condo said...

said much of its Waterfront project, a series of man-made islands set to be twice the size of Hong Kong, would also be pushed back.

Dubai Rental Index said...

In the real estate industry, Dubai is seen as a prime target for investment purposes. In fact, real estates in Dubai have consistently grown at 20% annually, compared to other places where constant fluctuations are the order of the day.

sunil said...

every place is vulnerable agreed...vulnerable to economic cycles of up and down. the question is, what will propel dubai out of this slump? dubai, unlike other developed places hasnt really experienced this historically. it will be interesting to see what happens here.

as to dubai rental index's point, yes dubai is a hot target for real estate investing, but investing stresses focus on ROI. how can one achieve that in today's environment of declining equity and downward pricing pressur on rents?