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Dubai Property Prices Plunge Up to 70pc; may Recover by 2011
30 March 2009
DUBAI - Freehold property prices in Dubai have plunged by as much as 70 per cent since March of last year but are poised to bottom out in another six months, real estate brokers said on Sunday.
Dubai’s once-booming property sector will see its ongoing sharp correction continue until the start of this year’s fourth quarter. Prices will remain flat through 2010 but show signs of recovery by 2011, these brokers said.
“We have already seen prices plummet across Dubai’s property sector by 50 to 70 per cent to the level of 2005. We expect the plunge to continue for the next six to eight months to bring prices down to their original level five years ago,” said Mohammed Khan, Managing Director of New World Capital, a Dubai-based real estate brokerage.
Dubai’s property prices, propelled by a swelling expatriate population, speculative investments and rising construction costs, surged by 25 per cent in the first half of 2008 over the first half of 2007.
The drastic downturn in the last quarter of 2008 and first quarter of this year is evident in varying degrees across most developments in the emirate.
The average price for a villa at the Garden Homes project crashed from a high of Dh15 million one year ago to Dh6 million — down 60 per cent. The average price of a home in Signature Villas on Palm Jumeirah dropped to Dh12 million from a range of Dh22-25 million, 12 months ago. Apartments in Jumeirah Lake Towers that were selling last year at Dh1,500 per square foot are available now for Dh700 per square foot, Khan said.
The price decline has been less severe for low-cost developments. A one-bedroom apartment at International City dropped from Dh700,000-750,000 range to Dh400,000 while the price of a studio unit there fell from Dh500,000 to Dh275,000.
Khan and other property brokers spoke on the sidelines of a seminar on “Selling in a difficult market” conducted by Judy LaDeur, a US-based property consultant. They painted a market scenario that was starker than the latest study by investment bank EFG-Hermes, which said on Saturday that the Dubai market had entered a period of correction after a sustained period of buoyant activity. The bank forecast overall price declines of 50-60 per cent from peak prices in 2008.
A drop in residential as well as commercial rents is also evident, brokers said. The slide has been more pronounced in areas of New Dubai, where rents have fallen by up to 40 per cent. A. Najeeb, Sales Manager of M.S. International Property, said apartment rents in the more established area of Al Ghusais were also declining fast. A flat that rented for Dh120,000 last year is available now for Dh70,000 at a discount of more than 40 per cent.
More drastic has been the decline in commercial property rents — almost 60 per cent across Dubai. “We are expecting further rent drop by May-June, when a lot of expatriate families will be going back,” Najeeb said.
Hafiz Sohail Ijaza, Property Consultant at Wood Bridge Real Estate, expects the property market will remain balanced in terms of supply and demand through 2009. “We don’t see a recovery for the off-plan property sector till 2010.”
Bank finance is critical to market recovery, as several projects are on hold or delayed for lack of liquidity. Brokers said their main concern was about a buyers’ strike, which would drive down transaction volumes.
Developers have taken steps to try to revitalise the sector. Emaar, for instance, offers a 25 per cent price discount on its Standpoint projects.
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