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Dubai House Prices Down 42pc; Further Drop Seen
DUBAI - House prices in Dubai have dropped by as much as 42 per cent in the last six months, and are likely to fall further as new supply is coming in amid faltering demand, property consultant Colliers CRE Plc said.
Prices will continue to go down this year, Colliers said, even as it already lowered its estimate of new residential units completed between the first quarter of 2009 and fourth quarter of 2011 to 64,800 units from 140,000 units.
In spite of the expected downturn in the supply of new units into the market, this additional supply, together with the rapid shift in the supply-demand dynamic, will exacerbate the existing oversupplied position in the market, Colliers said.
“It’s reasonable to assume that as a new stock continually comes online, that the downward trend in the market will continue throughout 2009, and is unlikely to stabilise before the second quarter of 2010,” said Ian Albert, regional director of Colliers.
The property downturn is being aggravated by weakened demand as expatriates — who have fuelled the sector’s growth in the last five years — have lost their jobs, while banks are still cautious about lending.
“Sentiment has deteriorated further as corporate downsizing has become more pronounced and greater job insecurity has forced end-users and occupiers away from the market,” said Albert.
Aside from residential prices, rental prices for office space have also gone down by an average of 15 per cent in the Trade Centre area, and the downward adjustment is much more severe in “New Dubai” Overall, rentals have dropped by as much as 45 per cent in Dubai, Colliers said.
Real estate adviser DTZ, in a separate report said that despite the shortage in Abu Dhabi’s office market for the next three to five years, it is experiencing a decline in both rental and sales prices in recent months. This trend is set to continue in 2009 before prices stabilise in 2010.
Office rental rates in high-end areas in Abu Dhabi have declined to Dh3,000 per square metre per annum from Dh4,500. DTZ said office sales prices in Abu Dhabi have dropped to Dh1,800 from Dh2,300 per square feet.
Property analysts however, are forecasting the city’s office market to outperform its regional peers and will overtake Dubai to become the most expensive office location in the GCC by 2010.
“Looking ahead, the key trends that will play out in Abu Dhabi’s office market include a flight to quality as new Grade A office space is delivered to market; the release of informal office stock such as villas and apartments back to the residential sector as occupiers trade up,” said Martin Cooper, DTZ’s head of consulting and research said.”
Abu Dhabi’s residential market is also experiencing a decline even if there is a shortage of 44,000 residential units in the emirate’s metropolitan area.
DTZ said that rental prices for apartments will decline slightly by up to 5 per cent in 2009, with a more marked decline for villas of up to 10 per cent.
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