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‘A Tale of Two Cities’ shows signs of property recovery

This complements the recent UAE Economic Report which highlighted that the contribution of real estate to the GDP is 8.2 per cent, ranking high among the key contributors to the non-oil GDP.

The Hamptons report ‘A Tale of Two Cities,’ compares price spreads and demand patterns between Dubai Marina and International City, two popular destinations for property customers.

The average price of homes in Dubai Marina, according to the report, has steadied in the range of Dh800 to Dh1,000 per sq ft, recording a drop of only 11 per cent compared to the peak prices in the latter half of 2008 and early 2009.

The price spread has now apparently stabilised at Dh1,000 per sq ft in Dubai Marina, and at Dh800 per sq ft in International City.

The report said there is an apparent upswing in prices. “Compared to other global locations, the price correction confirms the market’s resilience to the global financial crisis.”

International City too recorded price stability over the half-year 2009 and early 2010, when prices showed upward movement. “The price volatility in International City has been more significant compared to Dubai Marina, but what is common are the signs of appreciation,” the report said.

Transactional volumes have also stabilised over the period. The volume had declined sharply during the last six months of 2008 in Dubai Marina, while it peaked in early 2009 at International City before tailing off during the past year.

The transactional volume in Dubai Marina, according to the report, has stabilised now at about 150 transactions per month with the volume increasingly sharply since February 2010. Transactional volume in International City has been consistently higher than Dubai Marina, a trend that is expected to prevail.

Surprisingly, there has been little correlation between transactional volumes and price in Dubai Marina. The report says one reason could be the unwillingness of sellers to reduce prices further which may have led to stabilised rates and reduction in transaction volumes. The volume curve is now a ‘W’ indicating the volume increase in 2010.

The report said one critical factor in the positive boost for the market is the reduction in interest rates by Abu Dhabi Finance to a minimum of 4.99 per cent. If the Dubai banks follow the same lead, the cost of borrowing will decrease and activity will pick up.

The report urges banks to place more emphasis on the applicants’ financial status than the value of the property. “Placing more value on the property was one of the contributory factors to the subprime crisis in the US, and this approach has been proven to be flawed,” it said.

Emphasising that banks have a vital role to play, ‘A Tale of Two Cities’ states that of all the entities banks and financial institutions have been the most affected.

“This has led to lethargy in confronting the problems they face and the status quo appears to be a waiting game hoping that values return. We suggest that the banks take a more active role in taking remedial action.”

Hamptons is a premier realtor with over 85 offices worldwide. With more than 140 years of professional experience, it has earned an unrivalled reputation for professionalism, expertise and innovation across the world with a global network of offices and a large international portfolio of projects.

The range of services offered by Hamptons includes residential property sales, residential and commercial leasing and property management as well as full range of added value services including valuations, research and feasibility studies, and an independent mortgage consultancy.

business@khaleejtimes.com