Dubai property prices may fall further
10 June 2009
Standard Chartered bank says signs of stabilization in Dubai’s property market are encouraging, but further falls cannot be ruled out and should even be welcomed, reports Arabian Business.
“After a fall of 30 to 40 per cent … the first signs of stabilization in Dubai’s real estate sector have appeared, taking observers by surprise since further declines were expected,” said analyst Philippe Dauba-Pantanacce. “Some caution is warranted, as there are still question marks surrounding population flows in the coming months,” he added.
Real estate prices in Dubai may also have to avoid a return to earlier levels if the city is to compete with global hubs such as New York, London and Singapore, the bank said in the report.
In a survey of the world’s most expensive office markets by CB Richard Ellis last year, Dubai ranked seventh worldwide, ahead of London, Paris, Singapore, and New York. “This does not accurately reflect these cities’ comparative advantages, demographic pressures, and physical constraints relative to Dubai’s,” said Dauba-Pantanacce. “Thus, Dubai’s real-estate market needed to become better-aligned with its intrinsic value.”
A report published by London-based Knight Frank in May said that Dubai’s property prices fell by 32 per cent from March 2008 to March 2009, making Dubai the world’s second worst performing property market after Latvia.
However, late last month, HSBC released a survey saying property prices in Dubai and Abu Dhabi are picking up, with prices rising by 4 per cent in April and 5 percent in May.
The market may be on the mend, said David Lepper, head of UAE equity research at HSBC. “Market data from April and May show a range of positive indicators: agreed property sale prices are rising, volumes are holding up well, and banks have loosened their lending criteria.”
“We will not be able to discern a sustainable trend until later in 2009,” the bank added, however. “And while we note these positive developments, the market as a whole is coming off a very low base, given the sharp declines since the market peak. Credit growth remains subdued, and the UAE economy still has challenges to deal with.”