Property prices in Dubai continued their slide in the second quarter, but at the slowest rate since the market peaked last year.
Dubai property price slide eases
Property prices in Dubai continued their slide in the second quarter, but at the slowest rate since the market peaked last year, a report from Colliers International has revealed. The number of transactions in the second quarter increased 50 per cent compared with the first three months of the year, it found. Residential property prices in Dubai fell 9 per cent between April and June, against a 42 per cent decline in the first quarter of this year, the report said.
While a shortage of home finance, concerns over job security, a lack of transparency and project cancellations continue to hamper the market's recovery, the second quarter saw the slowest rate of decline in prices since the start of the downturn last October. Prices were down by 50 per cent from their peak in the third quarter of last year, marking a return to levels last recorded in the second quarter of 2007, the report said.
The Colliers House Price Index, which is compiled using mortgage transaction data from financial institutions that account for 60 per cent of the mortgage market in the emirate, found that the number of transactions increased 50 per cent as banks gradually released loans for properties that were either completed or were close to completion. Ian Albert, the regional director at Colliers, said there should be further evidence of stabilisation over the next few months. "However, the results of the third quarter are traditionally distorted by the summer holidays and the holy month of Ramadan, and we would expect quarter four of 2009 to be a better indicator of future trends," he said.
The index, which covers about 14 developments, shows the average price of property fell from Dh1,037 (US$282) a square foot in the first quarter to Dh949. Villas were the hardest hit, with average prices dropping 18 per cent in the second quarter, while apartment values fell 3 per cent. Despite the difficult environment, some analysts and brokers reported price stabilisation in certain areas of Dubai in June compared with May. Deutsche Bank reported that home prices rose about 6.5 per cent in 13 locations around Dubai in the month, compared with May.
Brokers said a four-bedroom garden villa on Palm Jumeirah was listed at between Dh7.5 million and Dh8m last month, up from Dh6.5m in March, while a basic apartment in the Shoreline Apartments carried a price tag of Dh1.9m, up from Dh1.7m in March. But property analysts remain cautious about predicting a recovery or stabilisation of property prices. Saud Masud, a property analyst at UBS, said the market still had a risk of oversupply, with an estimated 30,000 new units due to become available between now and the end of the year.
A decline in the population would also hamper an early recovery, Mr Masud said. A report by UBS earlier this year said the expatriate population in Dubai was likely to fall by 8 per cent this year because of redundancies. "Financing has not returned to the market in a meaningful way, transactions are well below last year's levels and committed capital inflows and market liquidity has not come back to sustain asset price inflation," Mr Masud said.
"I think the market may start recovering in 2012 and we may very well witness flattish prices for one to two years after a bottoming out in a year or so." The property consultancy CB Richard Ellis said last week that office rents in Dubai had fallen 50 per cent in the past nine months as business activity declined, while residential rents dropped 40 per cent. email@example.com