Monday, January 26, 2009

Dubai property prices to reach lowest levels by later-half of this year

According to analysts in Dubai, property prices will hit the lowest during the second half of this year, while the distress sale subsides and layoffs in property and financial sectors will continue.
During the last four months, property prices in Dubai have been pushed down by homeowners and speculators, who are struggling to make their payment instalments, further pressurizing the price index.

The brokers and analysts however, did not comment or predict how far the prices would drop. A Dubai-based property analyst said that it would all depend on the number of subsequent layoffs and fire sales, and the manner in which developers would restrict supply to spur demand.

A Property Analyst with Shuaa Capital, Roy Cherry, said that the market is largely being driven by panic, mainly due to lack of transparency and information, which is preventing people from making a good assess of the market situation, and is stopping them from facing economic recession with confidence.

The government, from its end, however, is continuing to take measures to revitalize the mortgage market.

The Director, Investment Bank, Arqaam Capital, Ali Khan, said that prices are likely to hit the bottom during the second half of this year. However, a gradual return of liquidity in the market is required, and layoffs need to subside, for the investor confidence to return in the market, apart from resurrection of visa guarantee.

Fire sales are already happening in the market and prices have dropped more than 50 percent in few areas such as Downtown Dubai and Palm Jumeirah, compared to their peak between June and September last year.

"Dubai has already been three to four months into fall, and we should expect stability to return by second half of the year, although, this does not imply that prices will recover this year," Khan said.

Dubai has been witnessing job redundancies and cancellation of projects, due to factors such as liquidity pressures and lack of funding. The investors have therefore begun to redeem whatever best they can from their investments to cut losses.

Although the Central Bank has deposited capital into the financial system, and has introduced a swap facility to raise funds and cut down interest rates, hoping to ease lending conditions. The market remains tight, indicated a note from Standard Chartered Bank.

Government officials are trying to control the number of units arriving at the market, to boost demand. According to Khan, the fall in prices would be drastic for properties that have been already delivered to investors, and will be slightly less for those under construction or for those that have been delayed.

2 comments:

sunil said...

yes this is an inevitable and necessary cycle. less discretionary income means people have no $$ to spend. this means companies make no money and they lay off, downsize. down sizing leads to people leaving dubai or demanding lower rents to afford. property prices are ultimately driven by rents (supply demand concept)....it is inevitable indeed

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