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EFG Hermes: Dubai 2010 Recovery

September 23, 2009Article by Ray Withers

The Dubai property market is to recover in the middle of next year according to new research by EFG Hermes.”We do not anticipate any strong recovery in Dubai selling prices before the second half of 2010 at the earliest,” analysts Sana Kapadia and Jad Abbas, said and revised their ratings and fair values on the UAE construction sector.

The analysts said balance sheet constraints of property companies in the UAE may put an effective cap on short-term performance until liquidity conditions improved.EFG Hermes is one of the most reputed investment consultancies in the world, having correctly forecast the property crashes in Singapore and Dubai.

That said: this is the fifth such report almost in as many days, and the issuers of the 4 before were equally well respected. Unfortunately no two predicted even close to the same short term future for the Dubai property market.

One interesting thing in the EFG Hermes report: is the forecast that the Dubai market could have a knock on negative effect on the Abu Dhabi market which is doing much better.While the Abu Dhabi market is fundamentally strong, the knock-on effect of lower rents in Dubai could precipitate a supply-demand driven market correction, as more residents and businesses choose Dubai over Abu Dhabi, the analysts said.

If more companies choose Dubai because of low rents, then yes, it will be bad news for Abu Dhabi, but won’t it be good news for Dubai?More companies coming in will mean more rental revenues (if at a reduced rate) and potentially more much needed jobs, not to mention more cash flowing into the banking system.

Last month, a consensus seemed to be building behind the fact that Dubai’s property market had bottomed in the second quarter but growth would be slow for a few years. This was because property prices fell by around 5% in the second quarter, having fallen by 40% in the first quarter.

Such a massive slowdown in price falls could easily indicate a market past the worst. If that is indeed true, then those awaiting the bottom ready to make their move are likely circling above Dubai as I write.


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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