Dubai property market harder hit than others in the region

The property market in Dubai is expected to stabilise in 2010 but not recover until 2011 as high levels of new supply are maintained, according to analysts.

This year will see a period of correction as the global downturn continues, according to a research report from Jones Lang LaSalle. Prices and rental rates should then stabilise but the first signs of recovery are unlikely before 2011, it says.

Dubai is expected to be harder hit than other markets in the Gulf region due to its greater integration in the global economy.

'The impact of the global economic crisis on real estate markets in the GCC has been both sudden and dramatic,' the report said.

'While other markets across the region are likely to witness a similar shape to their cycle, the timing and magnitude will be somewhat different to that experienced in Dubai,' it continued.

The GCC real estate markets have come under increasing pressure as banks across the region stop lending in a bid to reduce their exposure to real estate, while developers are being hit hard by defaulting buyers and a debt market that has dried up.

But, Jones Lang LaSalle said that the downturn also presented significant investment opportunities. Analysts highlight the Abu Dhabi commercial sector, middle income housing in Dubai and Saudi Arabia and Qatar as good options.

'Evidence from past corrections in other markets suggests those that act decisively during the downturn are best positioned to benefit from the subsequent recovery phase of the cycle,' the analysts said.

'Among the markets and sectors where we see continued opportunities for investors are the commercial sector in Abu Dhabi, middle income housing in Dubai and the Saudi and Qatar markets that have been less impacted by the global turmoil than others,' it added.

The firm sees potential for other property markets in the region to experience a return to growth in 2010.

However, Dubai was likely to remain handicapped by the high levels of new supply until 2011, it concluded.