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UAE Property Slump may be Short-lived
DUBAI - The property slump in the UAE is a painful reality check with all the signs pointing to a more severe global recession in 2009, but the sting is likely to be short-lived, said EFG Hermes.
“We do not believe a market crash
will endure,” EFG Hermes said in its latest research on the UAE property sector.
It said the confidence crisis could be hurdled if immigration holds up, liquidity is pumped at both the corporate and retail level, and if legal standing of property ownership and transactions improve.
EFG Hermes forecast
“Market segmentation looks set to move to more affordable housing and rental projects, facilitating a more sustained pace of development.”
It said the continued pick up in the rental market will prop up
“This impact of persistent rental inflation helps to address the demand question in part, helping also to provide support to the fragile property sector.”
Still,
These include overall weaker global confidence, a potential mass exodus of “speculative froth” from the market, a transfer of liquidity from real estate to other asset classes, a growing number of defaulters and big price drops for off-plan properties.
Cautious buyers are also opting for completed properties as banks and mortgage companies tighten purse strings. High-end properties are likely to be pummeled by price corrections as demand shifts to rentals and on affordable housing.
With no new major additions of residential units expected until 2010, prices are seen climbing 15 to 20 per cent in 2009.
“
EFG Hermes said investor confidence in the sector can be restored if proper measures are taken.
Injecting liquidity to the banking
system, already done via a Dh50-billion emergency borrowing facility, and a Dh70-billion direct depositing facility — can be matched by other federal facilities.
Federal governments can also guarantee working capital requirements and absorb excess defaulted inventory to ensure the liquidity status of developers.
Despite the slump, the UAE growth story still holds true, said EFG Hermes.
“UAE offers a multitude of incentives in terms of a business-friendly environment, quality of lifestyle and overall growth prospects of businesses and residents alike.”
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