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Small rise in property sales in Dubai

Real estate experts are pointing out that no one wants a rush back to the heady days of speculative flipping which made the emirate one of the hottest markets on the planet, and that a steady recovery is better.

The latest figures from the Dubai Land Department show that it is certainly not going to be a quick recovery. Dubai saw 1,603 real estate deals in the first ten months of the year, a 70% decline compared with the height of the market when there were 5,363.

But the figures show a 37% increase in property transactions when compared to 2009 at the height of the financial crisis, suggesting that there are indeed signs of recovery in the city’s battered housing market.

The average number of monthly real estate sales is 160, up from 117 in 2009 but still a dramatic way from the average 536 property transactions seen a month in 2008, as off plan properties were flipped multiple times by speculators.

‘It reminds me of how truly extraordinary the market was from 2005 to 2008, and how regular it seems to be today,’ said Ryan Mahoney, chief executive officer of Better Homes, the largest real estate firm in Dubai.

‘We are operating in a market that has less than a quarter of the annual transactional value that it had in previous years and yet we are bus and we even excited by the small spurts of growth we see from month to month,’ he added.

According to Charles Neil, chief executive officer of Landmark Properties, the rise in sales was attributable to an increase in bank lending and the increasing number of Chinese and Indian investors entering the market.
‘There has been an increase in liquidity in the market. Banks are being more active in providing mortgages and interest rates on mortgages have come down from level of around 8 to 6%,’ he added.

Property prices in Dubai soared after the city opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments. From the start of 2007 to the middle of 2008, prices soared almost 80% and billions of dollars worth of new projects were launched by local developers. But prices have fallen by 60% since the global economic downturn took a grip.

House prices in some parts of Dubai showed signs of recovery in the third quarter, with slight rises in prime projects such as Palm Jumeirah and Arabian Ranches, according to data from property consultants Jones Lang LaSalle.

But analysts remain concerned that the estimated 33,000 new homes scheduled to hit Dubai’s market by the end of 2012 could cause fresh declines in rental and sale prices. Renewed global financial woes and the European sovereign debt crisis are also likely to cause more pain, with Moody's last month predicting no price recovery before 2016.

Andrew Goodwin, Dubai director of real estate consultancy DTZ, said transactions remained subdued as landlords fail to match their asking prices to new economic realities. ‘We receive significant interest from investors looking at the Dubai market but in many cases there is a discrepancy between the purchasers and sellers valuations which keeps volumes low. Those sales that do go through are where the purchaser has a long-term confidence in the Dubai market,’ he explained.