Real estate experts predict Dubai prices will keep falling for another two years

The emirate, once a glittering real estate paradise where tens of thousands of pounds were made in minutes, has seen its property market hit rock bottom with prices in some locations dropping 60% since the peaks of 2008.
 
But values may fall as much as another 20% by the end of 2012, according to a new assessment from property broker Landmark Advisory.
 
About 48,000 new homes are due to come on to the market in the next two years, or about 12% of existing supply, according to Jesse Downs, director of research at Landmark.
 
Downs said that new properties will drive down rents, pushing values lower. ‘Rents are very important because occupier demand leads investor demand,’ she explained. She expects that prices will drop 15 to 20% by 2012 if the most residential buildings currently under construction go onto the market as scheduled.
 
‘If the pipeline is delayed, that will only prolong the cycle. Properties won’t see renewed demand until prices come down further and buyers have greater certainty over long term rent yields,’ she added
 
Other real estate companies are also forecasting prices falls, including Cluttons and Jones Lang LaSalle. ‘There is still no parity between supply and demand,’ said Paul Richard, associate director at Cluttons in Dubai, which estimates that 35,000 homes will be completed through 2012.
 
He added that he believes it could take another two years for the market to reach bottom and reckons that prices will fall 5 to 10% by next summer. He believes that the market needs to attract back the foreign buyers who fuelled the boom but that is a challenge as many have lost money and residency rules have changed.
 
‘The visa rules have been highly damaging and definitely shattered people’s confidence. Many bought property just because that would enable them to live here. They had their five year residency and built their lives around it. Now they don’t have that security,’ explained Ludmila Yamalova, a partner at law firm HPL.
 
According to Craig Plumb, head of Middle East research at Jones Lang LaSalle, prices are still falling and the rate and duration of the decline will depend on the type of property. Hotels will recover first and commercial properties last, he said.
   
This flies in the face of a prediction last month from Emaar chairman Mohamed Alabbar that Dubai’s market has bottomed out ‘without a doubt’ and ‘not much’ new housing supply is coming on the market. Predictions of an end to the slump have proven overly optimistic in the past. In May 2009 Deyaar said the property market would bottom out that year.
 
Dubai’s Real Estate Regulatory Agency is trying to limit property supply. Chief executive officer Marwan bin Ghalita said RERA has cancelled 202 projects since the beginning of 2009 and isn’t allowing developers to start new ones without funding them in advance.