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News Middle East More gloom for Dubai real estate market as second property index shows price falls in second quarter
News Middle East More gloom for Dubai real estate market as second property index shows price falls in second quarter
More gloom for Dubai real estate market as second property index shows price falls in second quarter |
| Monday, 09 August 2010 | |
 Dubai real estate down The oversupply of residential property in Dubai is predicted to peak in 2012 with vacancies of between 25 and 28%, according to the latest real estate report by Landmark Advisory. At the same time distressed sales are leading to accelerates price declines, according to the Dubai and Abu Dhabi Real Estate Report for the third quarter of 2010 from the consultancy.‘As prices are falling faster than rents, this is pushing up yields,’ said Jesse Downs, director of research and advisory services at Landmark Advisory. ‘This is positive for the market as higher yields are required to attract investors wary of the weak market fundamentals and perceived downside risk. At the moment, financing remains limited, which means investors continue to dictate market trends,’ she explained. The report found that sale volumes slowed in the second quarter, compared to the first. Prices for villas dropped by 5% and apartments fell by 5.8% as a result of limited buyers and tighter lending restrictions. In neighbouring Abu Dhabi quality issues could lead to a rapid reshuffling of the market as the new higher quality supply is delivered, the report also points out. Downs expects only 20% of high end properties in the pipeline will meet the standard, which will have a knock on effect on prices for mid-range homes. ‘However, we predict that this trend will be temporary, with performance weakening and not recovering once the truly high end developments are delivered,’ she added. In Dubai and Abu Dhabi rental costs declined across the board with Dubai villas down 4.4% and apartments down 5.8% during the quarter. Abu Dhabi rents dropped by 11%, a sharp decline compared with 3% in the first quarter of the year. ‘These declines are supply driven following new on-island deliveries such as Khalidiyah Palace, Al Aryam Tower, Silver and Wave Tower. Static sales prices and declining rents have resulted in further yields compression, currently at 5.1%, and we anticipate that yields will continue to compress in the short term,’ Downs explained. The figures confirm those released by consultants Colliers International earlier this month which showed house prices fell by 4% in the second quarter of the year compared with an increase of 2% in the first three months of 2010. The consultancy is predicting that around 33,000 new units will be released onto the market by the end of the year, less than its original estimate of 41,000 due to project delays or rescheduling. ‘There are already more than 340,000 residential properties in Dubai with an average occupancy rate of 87%, with further declines anticipated,’ said Colliers International’s regional director, Ian Albert. ‘The market simply cannot absorb the additional supply unless the population grows and/or the release of stock is slowed down,’ he added. Albert also warned that a dramatic drop in rents made home ownership a less attractive option for investors in terms of income generation, another factor that was weakening demand.
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Dubai sees second highest global price increases{mosimage} Property price growth in Dubai is the second highest in the world in recent months, only surpassed by price increases in China.Search for Properties:
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