Sunday, August 02, 2009

Decline in property prices, rentals will not be too severe

According to leading property consulting firm, CB Richard Ellis, weakening sales, lessening demand and fresh supply entering the market, will lead to immense declines in property prices and rentals in Dubai during the second half of this year, but the drop will not be as severe as experienced during the previous half of the year.

The once-booming property sector in Dubai, is yet to recover, although the price declines are reducing, and will hopefully bottom out by the end of the year, said CBRE in its latest report on the property market here.

The property market in Abu Dhabi enjoys a better edge over Dubai, but will remain subdued although price drops will level off, as more investors plan to hold on to their assets due to lowering prices.

The Associate Director at CBRE Middle East, Matthew Green said that the company has already registered double-digit falls during the first half, but the declines will be limited to single-digit level during the rest two quarters.

Green said that he does not expect recovery in Dubai until next year, as the residential and retail prices will be further pressurized due to high volume of supply.

According to CBRE, the pressure on lease and occupancy rates during the second half will be most prominent in new residential developments such as International Media Production Zone, Dubai Silicon Oasis and Motor City.

In the commercial office market sector, supply will substantially increase during the next six months, and the majority will be from new business areas such as Al Barsha, Jumeirah Lake Towers, Business Bay, TECOM and Dubai Silicon Oasis.

With the supply continuing to surpass demand, the competition between landlords will tighten, resulting in greater incentives for tenants, Green said.

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