Iconic Palm Jumeirah in Dubai sees property prices at four year low

Prices of property on the Palm Jumeirah development, one of Dubai’s most iconic landmarks,  have fallen to a four year low, with apartments being offered for as little as AED650 ($176) per square foot.

Research by Arabian Business shows that a number of apartments on the Palm Shoreline have been put on sale in the past month with asking prices nearly 70% down from the height of the boom in 2008. The lowest listed price is a C type apartment, occupying 2,620 square feet, being offered for AED1.7 million ($463,215).

The revelation comes less than a week after the United Arab Emirates government announced the extension of visa for real estate investors from six months to three years in a bid to attract more real estate investors from abroad. Presently, foreign owners of property worth more than AED1m are eligible to get a six-month visa, which needs to be reviewed every six months.

Dubai property prices continue to fall and political instability in the Middle East failed to give the market an expected boost, Deutsche Bank said in its most recent report.

Home values fell 1.2% in May compared with the previous month and rents fell by 1%, analysts Nabil Ahmed and Athmane Benzerroug wrote in a note to investors. Apartment prices slid 1.3% in May, while villas declined 1%.

‘Despite talks of renewed interest in real estate following regional unrest, there is no visible sign of an improvement. Even if we believe the worst of the downtrend is now behind, new supply, lack of homebuyers’ appetite and anemic transaction activity point to further weakness,’ the note said.

Dubai’s commercial property market is also in decline. Office sales are set to see further price declines of between 10 and 12% according to a new report from Kuwait based Global Investment House.

It said the average drop in Dubai office selling prices was 58% between the peak in the fourth quarter of 2008 and the end of the first quarter in 2011. Average selling prices have dropped from AED2,250 per square foot to AED933 per square foot during the same period.

‘We expect pressures on selling prices to persist over the short to medium term as vacancy rates remain high at 40% and new supply of 19 million square feet, equivalent to 33% of existing supply, enters the market by 2013,’ analysts said in the report.

‘We believe asset prices need to adjust further downwards to generate investor interest in the oversupplied market,’ they added.

In Abu Dhabi, Global said vacancy rates hover at below 10% of the total existing 24 million square feet. It added that the vacancy rate was expected to increase significantly as a new 13 million square feet, a 54% addition to existent supply, enters the market between 2011 and 2013.

Office rents have dropped 69% and 45% in Dubai and Abu Dhabi, respectively from the peak in the fourth quarter of 2008. Average office rents in Dubai stand at AED64 per square feet per year, with DIFC charging higher rates of AED120 to 175 per square feet per year.

‘Going forward, we expect prime office rents in areas like DIFC and Downtown Burj Dubai to diverge downwards closing the gap with other ex-CBD areas, which should be nearing a long term bottom,’ Global said.

"A reversal of the declining trend remains out of sight for the next five years, in our view, given the present high vacancy rates, supply increase and economic conditions. We expect the decline in Abu Dhabi rents to speed up in the coming two years as the new grade A supply enters the market accelerating the vacancy rates of grades B and C and eventually pressuring grade A rents downwards,’ it added.