According to Bonyan International Investment Group the UAE mortgage market will tripple in the next 3 years to 64 billion dirhams, (KD 4.656 billion). Although I believe that Dubai’s residential property prices are expected to decrease about 10% within one year due to the over supply of newly constructed residential areas and the expectation that supply will increase while demand decreases in the coming years. In a move to discourage speculation, off-plan property sales must be registered with the land department and the developers will no longer be allowed to charge transfer fees. UAE’s housing rent jumped a staggering 18.8% in 2007.
Property prices in Dubai are likely to fall 10% by 2010 as the supply of real estate outpaces demand, according to a new report.
Global investment bank Morgan Stanley said that in a worst case scenario Dubai could follow the pattern of Singapore in the late 1990s when property prices plunged 80% in 18 months. But its report points out this a ‘low probability’.
However the report comes on the back of concerns from other financial institutions that the market in Dubai is in danger of overheating.
As Morgan Stanley points out prices in the Dubai property market have risen a massive 79% since the start of 2007. ‘We expect oversupply to hit Dubai in 2009, leading to a period of price declines,’ the report concludes.
This could have implications for other property markets in the Middle East. ‘While we expect these price declines to be limited to Dubai given the level of undersupply in surrounding markets, we cannot rule out a contagion effect on Middle East and North Africa property shares prices, as investor confidence suffers,’ it adds.
There is no doubt that Dubai is still booming। Economic growth supported by a six-fold rise in oil prices has attracted streams of investors. According to Morgan Stanley’s price index, Dubai property prices soared 25% in the first half of 2008 showing there is no sign of cooling yet.
Global investment bank Morgan Stanley said that in a worst case scenario Dubai could follow the pattern of Singapore in the late 1990s when property prices plunged 80% in 18 months. But its report points out this a ‘low probability’.
However the report comes on the back of concerns from other financial institutions that the market in Dubai is in danger of overheating.
As Morgan Stanley points out prices in the Dubai property market have risen a massive 79% since the start of 2007. ‘We expect oversupply to hit Dubai in 2009, leading to a period of price declines,’ the report concludes.
This could have implications for other property markets in the Middle East. ‘While we expect these price declines to be limited to Dubai given the level of undersupply in surrounding markets, we cannot rule out a contagion effect on Middle East and North Africa property shares prices, as investor confidence suffers,’ it adds.
There is no doubt that Dubai is still booming। Economic growth supported by a six-fold rise in oil prices has attracted streams of investors. According to Morgan Stanley’s price index, Dubai property prices soared 25% in the first half of 2008 showing there is no sign of cooling yet.
Prices have been driven by a combination of genuine demand, speculation and, most recently, escalating construction costs,’ it said. ‘For 2009, we expect prices to start coming under pressure as oversupply becomes evident. We forecast a 10% decline between 2008 and 2010,’ the report continues.
A slight easing of prices in the Emirate may not impact Abu Dhabi and Qatar, whose property sectors should remain undersupplied until at least 2012।
A slight easing of prices in the Emirate may not impact Abu Dhabi and Qatar, whose property sectors should remain undersupplied until at least 2012।
The prevailing high prices in Dubai’s real estate sector are not sustainable for long and a slowdown is likely, a top asset management company chief executive said this week
Prices are bound to stop growing at this maddening scale,” said Shehab Gargash, chief executive officer (CEO) of Daman Investments, on the sidelines of a press conference to announce investment in renewable energy venture. “Will it be a crash? I don’t think so. I doubt we will see a significant long-term bust. But we will see corrections.”
As long as demand continues to grow, the real estate sector will witness growth and prices will rise, he added. “But Dubai is no longer a straightforward build-and-sell proposition.”
In recent weeks, the real estate sector in the UAE has been under the spotlight for various reasons, including a much discussed, and criticised, Morgan Stanley report which said that Dubai is headed for a 10 per cent dip in prices in two years when supply comes online.
Gargash, however, did not elaborate on the kind of correction the market may experience but said that the market is in consolidation phase। He said that the market will see a differentiation in terms of good quality and bad quality developers.
As long as demand continues to grow, the real estate sector will witness growth and prices will rise, he added. “But Dubai is no longer a straightforward build-and-sell proposition.”
In recent weeks, the real estate sector in the UAE has been under the spotlight for various reasons, including a much discussed, and criticised, Morgan Stanley report which said that Dubai is headed for a 10 per cent dip in prices in two years when supply comes online.
Gargash, however, did not elaborate on the kind of correction the market may experience but said that the market is in consolidation phase। He said that the market will see a differentiation in terms of good quality and bad quality developers.
A developer agrees with Gargash’s thoughts. Given the “unrealistic” spiralling of the price of land in Dubai, property prices have been skyrocketing, said a developer and “that is simply unsustainable.” Construction costs in Dubai are also soaring, adding to the problem.
“The prices are unreasonably high”, said Mohammad Nimer, chief executive officer of MAG Group Property Development. “It is becoming less and less attractive for investors and end-users and so, a correction is bound to happen. And people who bought will actually realise that the price they paid was ‘inflated’ and the secondary market investors and buyers will stop and think before they invest,” he added.
Over the past month, the Government of Dubai has passed a mortgage law that makes registration compulsory and also laws that crack down on off-plan sales, giving rise to fears of speculation coming down and the market getting badly dented. “The new laws passed will have a positive impact on the market, though they will slow down the market. The market will be harder but it will be stronger,” he said.
It is premiums that the market has witnessed in recent years that may become a thing of the past, said Sudhir Kumar, managing director of Realtors International, adding that he is not expecting a slackening of the market in the next two years.
“There may be a temporary shake up of the market, given the corrective measures being taken,” he said। “What is possible, is when all the regulations are passed, then the abnormal rise in premiums will not happen.”
“The prices are unreasonably high”, said Mohammad Nimer, chief executive officer of MAG Group Property Development. “It is becoming less and less attractive for investors and end-users and so, a correction is bound to happen. And people who bought will actually realise that the price they paid was ‘inflated’ and the secondary market investors and buyers will stop and think before they invest,” he added.
Over the past month, the Government of Dubai has passed a mortgage law that makes registration compulsory and also laws that crack down on off-plan sales, giving rise to fears of speculation coming down and the market getting badly dented. “The new laws passed will have a positive impact on the market, though they will slow down the market. The market will be harder but it will be stronger,” he said.
It is premiums that the market has witnessed in recent years that may become a thing of the past, said Sudhir Kumar, managing director of Realtors International, adding that he is not expecting a slackening of the market in the next two years.
“There may be a temporary shake up of the market, given the corrective measures being taken,” he said। “What is possible, is when all the regulations are passed, then the abnormal rise in premiums will not happen.”
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