Most analysts agree that a price correction is inevitable and welcome a slowing down of speculation. But the property industry believes these predictions are over pessimistic and point out that demand is not going to suddenly disappear.
The debate began in earnest last month when a report from Morgan Stanley predicted at 10% fall in property prices by 2010. Then last week Egyptian investment bank EFG-Hermes said that property prices in Dubai are set to slump by 20% 2011.
However officials at Dubai Land Department believe any slowdown will be much more modest. 'In 2007, they said prices would go down. And the recent reports say prices will go down. But I said then it will be a very strong market. And it is,' said Sultan Bin Butti Bin Mejrin, DLD director general.
And Dubai's Real Estate Regulatory Authority (Rera) is optimistic. 'There will be a correction in some places but a correction in profit only. Rather than making 20% profit, maybe investors will make 5% profit. What have they lost?' said CEO Marwan Bin Galita.
A slowdown in prices should be regarded as a buying opportunity, according to Standard Chartered. 'I don't think the current situation is a healthy situation. Doubling your money in one or two months is not a situation driven by fundamentals but one that is driven by market psychology and excessive speculation,' said Marios Maratheftis.
But he added that investors who take a long term view can still achieve good profits. 'Doubling your money in a couple of years is perhaps not going to be as easy. But the global economy has seen the strongest growth in more than thirty years and this is now changing,' he added.
The basic fundamentals that make Dubai attractive to property investors are unlikely to change according to Abid Junaid, executive director of ETA Star Properties. 'Dubai's popularity with investors is to do with the lifestyle Dubai offers, it's strategic positioning in the Middle East and it's tax free status. None of that has changed,' he said.
