Summer property crash fails to arrive in Dubai but market still fragile

An expected summer property price crash in Dubai has not materialised, prompting optimism in the real estate market that the bottom of the market is close and recovery could be just around the corner.

The latest figures from real estate consultants Colliers International show that residential property prices in Dubai fell just 9% in the second quarter of 2009 compared with 42% in the first quarter of the year.

The significant slowing of the property price decline is regarded as an excellent sign for the hard hit sector but analysts are warning that the market is still in a fragile state. House prices are now at second quarter 2007 levels and are down 48% on a year-on-year basis, according to Colliers.

The report from Colliers says that the housing market's better performance is due to a 50% increase in transactions from April to June and a slight easing of mortgage availability.

However, it said financing still remained tight and said that expatriate job losses and lack of transparency from developers over project delays and cancellations are the main reasons behind the 9% drop in the second quarter.

'After a significant decline in the first three months of the year, the market witnessed a deceleration in the rate of decline in residential prices in the second quarter. Thankfully, the magnitude of the decline that occurred in Q1 2009 was not, and is now very unlikely to be repeated,' said Ian Albert, regional director at Colliers International.

He said that in the coming months the market will be searching for further evidence of market stabilisation as it draws nearer to the bottom of market prices. 'However, the results of the third quarter are traditionally distorted by the summer holidays and the holy month of Ramadan, and we would expect Q4 2009 to be a better indicator of future trends,' he added.

Marcello Sambartolo, head of marketing at propertyfinder.ae, said house prices for July appeared flat and that the real estate market was grinding to a standstill.

'The big summer crash tenants and buyers were hoping for did not materialise. As everyone walks on egg shells, the market appears to be coming to a standstill rather than performing any huge fluctuation,' he said.

A new survey by his company reveals that Dubai Marina is the most sought after locations, based on the views of more than 120,000 visitors to the website in the last month.