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Dubai home prices may drop another 10%: poll

(2011-10-27 08:47:18) 下一個
Published October 27, 2011 

Recovery before 2013 is unlikely because of oversupply

(DUBAI) Dubai's housing market will lose another 10 per cent of its value before its fortunes start to improve, possibly not until 2013, as investor appetite has been curbed by global financial woes, a Reuters poll showed this week.

Problem of plenty: Dubai's property market is oversupplied by about 25 per cent, say survey respondents. Oversupply in the UAE has forced developers to cancel and delay projects worth US$170 billion up to August, a Citigroup report showed.

Home prices and rents in the Gulf emirate have already plunged nearly 60 per cent from their peak in 2008, according to the median estimate of ten banks, investment firms and research institutions.

'Although we have witnessed better volumes and a slight increase in prices at a few property transactions, the overall sector is still facing oversupply and lack of volumes/investor interest, which acts as a headwind against price increase,' said Harshit Oza of Beltone Financial.

All but one of the 10 respondents said the renewed global economic concerns and eurozone crisis will further delay recovery of Dubai's property market.

Respondents in the poll saw no chance of a recovery this year. They gave just a 37 per cent chance of property market recovery in 2012 and a 70 per cent chance in 2013.

Prices in Dubai will plummet by another 10 per cent, an average of eight respondents showed.

The findings matched those of a Reuters poll in April which showed that existing supply and additional new units would push Dubai's house prices down by 10 per cent.

Global markets were rattled in 2009 when Dubai announced a US$25 billion debt restructuring of conglomerate Dubai World. A real estate collapse followed, putting an end to an historic building spree in Dubai.

Dubai's property market is oversupplied by about 25 per cent, a median of eight respondents showed with two saying the emirate has nearly twice as much supply as it needs. Two respondent said house prices in Dubai have already reached a bottom. Seven said they expected prices to reach a trough in 2012, while others said 2013.

In percentage terms, the Dubai housing market crash is set to be more than double the size of the fall in the United States.

A Reuters poll in September found that US home prices - as measured by Standard & Poor's/Case-Shiller 20-City Composite Home Price Index - will fall 3.8 per cent for the year, before stabilising and gaining 0.8 per cent in 2012.

Oversupply in the UAE has forced developers to cancel and delay projects worth US$170 billion up to August, a Citigroup report showed.

The United Arab Emirates, the second largest Arab economy, is likely to grow at 3.8 per cent next year, a Reuters poll showed last month. Analysts now estimate the overall debt burden of Dubai and its state-owned companies at around US$111 billion, or 137 per cent of last year's GDP, the poll showed. This is slightly less than the June poll's estimate of US$113 billion.

Abu Dhabi, the capital of the United Arab Emirates and home to most of the country's oil, had fared better during the downturn but is now facing challenges as a huge supply of high-end homes are expected to enter the market.

As many as 11,000 units will flood the Abu Dhabi market in the next quarter, a report by property consultants Jones Lang laSalle said this month.

Prices in Abu Dhabi are expected to fall another 14 per cent from here, or 60 per cent from their peak, the median estimate showed. 'Abu Dhabi and Dubai are not out of the woods yet,' said Patrick Rahal, manager for asset management at The First Investor bank in Doha.

'The market will continue to adjust in the short term as local banks are still averse to real estate lending and deliveries continue to increase supply. The supply-demand mismatch is still in place.'

Rental prices in Dubai will fall 8 per cent in 2011 and 5 per cent next year, the median forecast showed. Abu Dhabi rentals are expected to drop 14 per cent this year and 10 per cent in 2012. -- Reuters

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