UAE property slump has further to go, poll suggests
The slump in property values and sales in Dubai and Abu Dhabi won’t end this year as too A Reuters poll of banks, investment firms and research institutions found that many believe that house prices in Dubai will fall by a median of 5% in 2012 while some expect a fall of 8%.
Abu Dhabi, which was more resilient during Dubai's property market collapse, is now showing signs of pressure and respondents said prices could fall by up to 11% this year.
‘Macroeconomic concerns compounded with an ongoing supply/demand mismatch will further delay the recovery of the UAE property market,’ said Patrick Rahal, manager at Doha based investment company The First Investor.
Some said Dubai's property prices will stabilise during the year, while others said they would not do so until 2013 or beyond. Some thought prices had already reached bottom.
Economic growth in the UAE is expected to slow to 3.1% this year from 3.9% in 2011, in line with most of the other Gulf oil exporters, weighed down by a global slump. Real estate and construction accounts for nearly 22% of GDP.
Dubai's aggressive building drive has resulted in oversupply, with thousands of new residential and commercial units set to enter the Dubai real estate market.
‘The key message is that despite some recent stability, we still have a good chunk of supply coming in 2012 and as long as new jobs are not created to absorb the new supply, we are not likely to see any recovery,’ said Athmane Benzerroug, an analyst at Deutsche Bank.
Rental prices in Dubai and Abu Dhabi will also see a downward trend, dropping 5% and 10% respectively.
Abu Dhabi, the capital city of the UAE, fared better during the downturn but is now facing challenges as a huge supply of high end homes are expected to come onto the market.
Across the oil rich state, which accounts for more than half of the UAE's economy, government backed real estate, commercial and tourism projects, many conceived during the boom years of 2003 to 2008, are under review and in some cases being delayed or put on hold.
Abu Dhabi pushed back the opening of the much talked about local branches of Louvre and Guggenheim art museums earlier this month.
‘In Abu Dhabi, the prices and rentals are expected to be under downward pressure due to increasing supply of housing units in the capital at a time where there is less demand,’ said Sajeer Babu, an analyst at National Bank of Abu Dhabi.
The majority think that Abu Dhabi's house prices will fall 61% from its peak in 2008 and 14% this year. Some thought prices could fall by 15% or more in 2012.