Friday, July 31, 2009

Dubai at risk of further price decline

The already suffering property sector of Dubai is at risk of further price decline with the onset of seasonal summer and Ramadan slowdown, and with more expatriates leaving the emirate, coupled with oversupply, said Moody’s Investors Service on Tuesday.

According to Assistant Vice President and Lead Analyst for Emaar Properties, Martin Kohlhase, the oversupply in the market is unlikely to be resolved in the next one year, given the dynamic supply-demand developments, which would result in prices remaining sluggish or falling further, than over the past nine months.

The booming property market of Dubai had come to a stand-still with the onset of global economic crisis and drop in oil prices, putting an end of the economic boom in the gulf region.

Further, a Reuters poll showed that house prices are likely to drop another 20 percent in 2009.

Several thousands of jobs have been slashed and the redundant expatriates are likely to leave in the near-term, provided they find fresh jobs, Moody's pointed out.

Several expatriates, who were already made redundant, were permitted to stay back until the end of school term in June, without their visas being revoked within the usual 30-day period.

Furthermore, the large-scale lending is yet to resume and property developers have had to face several buyer delinquencies.

Moody's had placed the long-term issuer rating of Emaar and Dubai Holding Commercial Operations Group on review for a possible downgrade on 30th June, following announcement of merger of the two groups.

The merged entity will create a new giant in Dubai real estate market, with unrivalled access to a sizeable land bank. Several other factors such as the opening of Dubai Metro, inauguration of Burj Dubai, and the beginning of summer period would shape Dubai's residential property market in the near future, and this could lead to greater differentiation within Dubai's residential areas, from which DHCOG's and Emaar real estate divisions could benefit, Moody's said.

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