Property prices in the UAE may decline by another 20 per cent and level out by the end of the year, according to a report by Deutsche Bank. The predictions follow evidence over the past two months that prices in some areas of Dubai and Abu Dhabi have risen. Prices are expected to decline again because a number of expatriate workers are expected to leave the country over the summer period at a time when many new properties are coming onto the market.
"We remain cautious given the limited number of transactions and the continuing declining trend in rents," analysts Nabil Ahmed and Athmane Benzerroug wrote in the report. "We expect UAE property prices to decline another 15 per cent to 20 per cent from current levels and only expect a bottom by year-end." The global financial crisis has so far shaved an estimated 50 per cent off Dubai property prices since their peak in August last year, while prices in Abu Dhabi have fallen by about 30 per cent, the report said.
The percentage of properties that are left empty in Dubai could double to about a third by the end of next year, said UBS, the Swiss-based bank. Empty houses and apartments may increase from 15 per cent at the moment, said Saud Masud, a Dubai-based analyst at the bank, according to Bloomberg. About 30,000 new homes will be competed within two years, he estimated. Deutsche Bank said rising defaults by homeowners was one of the biggest challenges facing developers over the next few months.
"Developers under coverage would have to collect about Dh38 billion (US$10.34bn) from customers' instalments in the next couple of years, which we see as challenging," the report said. But there have been recent signs of stabilisation, with brokers and bankers saying prices in some developments in Abu Dhabi and Dubai have started to recover after a nine-month fall. The price rises have been seen in popular community developments such as The Greens and The Springs in Dubai, and apply to property worth Dh2 million or less.
"It's like any market: the cheaper you get the more people who can buy in that market," said Ron Hinchey, a resident partner at the property company Cluttons. Other brokers put the extra activity down to vendors selling their properties before the summer. In Abu Dhabi, prices for near-complete properties in Al Reem and Raha Beach rose by about 10 per cent last month compared with April, while villas in Al Reef were up between 5 per cent and 7 per cent, according to Cornerstone, a property broker.
"There was a period this year when people just wanted to get out of the market and were offering very low prices, original prices," said Ziad Bushnaq, the chief executive of Cornerstone. "But a lot of those people have now restructured their portfolios and are thinking back towards normal prices." In a recent report, HSBC reported prices in Dubai rising 4 per cent in April compared with March, and another 5 per cent last month.
The prices of flats, which account for 85 per cent of transactions, rose by 9 per cent last month but villas fell by 11 per cent, it said. * with Bloomberg and Dow Jones firstname.lastname@example.org