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Dubai to See Correction in Rentals, Prices: Jones Lang
DUBAI - Property prices and rentals in Dubai are likely to continue falling this year on deteriorating demand amid a supply glut, said international property consultant Jones Lang LaSalle.
“We see 2009 as a year of correction in the Dubai real estate market, with prices and rentals expected to decline across most sectors,” Jones Lang LaSalle said in its recent outlook on the Middle East and North Africa (MENA) region property sector.
The turmoil in the global economy will continue to cause volatility and uncertainty in the MENA property sector, but Dubai in particular, whose economy is closely integrated with the global market, faces bigger problems, said Jones Lang Lasalle.
“Dubai is the most global market in MENA and is one of the most global cities worldwide. This has served the city well during a period of strong global economic growth but [ there is now] a greater challenge in a period of synchronised global slowdown.”
It said that while some markets in the region may recover in 2010, “Dubai will be handicapped by significant levels of new supply” and is not expected to sustain growth in rentals and prices until 2011. In the residential market, an additional 190,000 new units will enter the market in 2009 and 2011, if all the announced projects will be completed on schedule. However, Jones Lang LaSalle said that the global financial crisis has severely crimped demand, resulting in short drop in sales as speculators and investors have withdrawn from the market.
Data from the Dubai Lands Department show that the number of sales of residential units in Dubai has declined by almost 40 per cent between October 2008 and January this year.
In the office market, active demand for new office space has weakened in the last six months, with many companies delaying previously announced expansion plans while others have streamlined operations.
“Market dynamics will continue to shift in favour of tenants as more new stock enters the market in 2009,” Jones Lang Lasalle said, with rents likely to decline in most locations in the first half of the year.
While other countries in the region are also experiencing high levels of supply, the correction is likely to be more immediate and more pronounced in Dubai.
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