Falling European property prices caused by the ongoing crisis in the Eurozone are luring investors away from the Abu Dhabi and Dubai markets, pushing down house prices.
According to new research from property management specialist Tasweek, house prices in Abu Dhabi are set to fall between 2 and 10 per cent over the next quarter while those in less popular areas of Dubai will fall between 2 and 5 per cent as potential investors are lured away by the possibility of cheaper deals outside the UAE.
Masood Al Awar, chief executive of Tasweek said that his company predicts the falls to come as both institutional investors and small time buy to let investors or potential owner occupiers were eyeing European bargains in light of the continent's economic pressures.
"The whole world is suffering from the global financial crisis and we in the UAE are not immune from that," he told The National.
"The Eurozone crisis is affecting the recovery over here because potential investors are weighing up what else they could buy with their money. This is delaying the decision making process as investors wait to see what is happening and prompting investors in some cases to invest in property overseas."
He added that in Dubai the fact that stalled schemes were now starting to complete was tempting tenants away from older and less desirable areas which was also leading to falls in prices and rents for older stock.
At International City, where average annual payments are at Dh21,500, Dh32,000 and Dh40,000 for studio and 1- and 2-bedroom units, respectively, he predicted prices would fall by 2 per cent over the coming quarter. The same would be true, he said for Dubai Silicon Oasis where rents stand at Dh24,000 and Dh40,000 for studio and 1-bedroom flats.
The Dubai International Financial Centre (DIFC) commands the highest average annual rental rates in the emirate, at Dh75,000, Dh80,000, Dh110,000 and Dh230,000 for studio and 1-, 2- and 3-bedroom units, respectively.
Tasweek predicted that prices in the area would grow by around 2 per cent during the quarter. Downtown Dubai also was expected to perform well with studio and 1-, 2- and 3-bedroom units going at Dh50,000, Dh65,000, Dh126,000 and Dh180,000 respectively and set to increase by between 4 and 5 per cent.
While the glut of new homes set to hit the markets in Abu Dhabi was also reducing rents - something which was also deterring investors swayed by total rental yields.
Although he added that the new decree which ensures Abu Dhabi government employees live within Abu Dhabi would be likely to put an end to steep rental declines next quarter.
In Abu Dhabi's Al Reem Island average rents for studios at Dh90,000 and 1-, 2- and 3-bedroom units stood at Dh100,000, Dh120,000 and Dh160,000 respectively.
Tasweek predicted that prices would stabilise in the area. He said the same would be true at nearby Muroor Road, studio and 1-, 2- and 3-bedroom units currently fetch Dh50,000, Dh60,000, Dh70,000 and Dh85,000, respectively.