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Dubai In The Doldrums For The Foreseeable

March 1, 2010Article by Ray Withers

Dubai property prices are forecast to continue falling in 2010 according to a new research report by the much-respected Landmark Advisory. Their prediction on apartments was particularly severe, with falls of 20% expected over the next 18 months.

The firm also revealed recent data to be released on the Dubai property market, which was as follows:
Landmark advisory revealed a 7% increase in Dubai villa prices in the third quarter of last year, but said prices have stagnated ever since, with just a 0.2% increase recorded in Q4.

Apartment prices, which fell 3% in the third quarter of last year, subsequently fell 4.3% in the fourth quarter.
Landmark Advisory’s research also echoed the recent research by Jones Lang la Salle on the polarisation of the Dubai property market caused by prices rising in several prime locations against falls everywhere else.

“While villas prices remain unchanged on average, there is a variance of pricing emerging based on location,” said Jesse Downs, director of research & advisory services, Landmark Advisory. “Sale prices for villa communities along Sheikh Zayed Road – which we refer to broadly as coastal communities – have increased while inland communities have decreased.”

The Landmark Advisory report highlighted another factor that will cause differentiation and polarisation in the Dubai property market this year; the fact that most of the stock set to come onto the market — both commercial and residential –, is to come from developers with a rating of C or less (low ratings), whereas the stock it is being built beside was built by high-grade (A) developers.

The report found that the average rating of the top 52 developers in Dubai is C, and that some seventy-one per cent of developers are graded C+ or lower.

Downs said:

“To date, much of the supply already delivered was built by master developers, which rank higher. However, these developers constitute the minority of the total pipeline of units within the next several years.

The single-asset developers currently building the bulk of the forthcoming supply have a significantly lower rank and may suffer further credit downgrades as their product is forecasted to overpromise and under deliver. This phenomenon will create a bifurcation between integrated, high-quality units and those poor quality units within fragmented communities where many builders have postponed their developments indefinitely.”

Adding further pressure to the market is the fact that the government is being forced to make spending cutbacks because of the emirates debt-balloon. This comes at a time when other regional players are increasing spending, for example Saudi Arabia has just unveiled its largest-ever budget of $144bn for 2010, a 14% increase on 2009′s budget. This will have a big impact on the competitiveness of Dubai. This is one of the main things investors look at, creating the potential for a vicious and self-perpetuating cycle.


Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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