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Dubai Property Prices Could Drop 20% More
July 2, 2009Article by Ray Withers
Dubai property prices could fall as much as another 20% this year as the desert kingdom plunges further in to recession.Spending billions on grand designs to bring prosperity to the city have faded away in to the desert sands, according to analysts at banks, investment companies and research organisations asked to look at the Dubai property market by The Guardian newspaper.
Famous for artificial palm tree shaped islands and the world’s tallest building, Dubai was until very recently the place to be seen by stars, celebrities and Premiership footballers.Property prices have already dropped through the floor in Dubai and prestigious projects worth billions have been embarrassing mothballed by developers – many with connections to the royal family.
The 10 analysts see no respite for the real estate in Dubai.
* Three say prices won’t bottom out before the end of this year
* Three say it won’t happen to next year
* Five expect prices to fall 20% more this year 20% and up to 15% more next year.
“We may see a further drop in prices as the magnitude of the problem in the sector is still high and the recovery of the sector may take some more time,” said Sajeer Babu, an equity analyst at National Bank of Abu Dhabi.During 2007 and 2008, property prices went up as much as 80% as billions were poured in to Dubai investment property – much bought off-plan by speculators.
Now, the city is a gigantic building site with almost a fifth of the population expected to leave this year as business and building collapse. Many are workers from overseas.Also contributing to the Dubai downfall was the city’s mainly ex-pat population option to rent instead of buying as property prices shot up.
That demand pushed rents up as well – and now property owners are finding the rental demand is falling away as well.
Other Gulf states have fared better than Dubai due to their expansive oil industries – property prices in Abu Dhabi have dropped but at less than half the rate of those in Dubai.”We believe a recovery is likely in late 2010 or early 2011, with this based on a series of factors which include a decline in demand for buying property,” said Sana Kapadia, Vice President, equity research at EFG-Hermes in Dubai.
“Our house view is that lower or potentially negative population growth is likely to put a strain on demand,” she said, adding more clarity regarding the legal framework for property ownership and greater confidence were also needed.”