Dubai Property Market Shows Positive Signs
The last six months have been particularly challenging for the Dubai property market, with property prices in the emirates reducing by as much as 40% in some areas. More recently however, they have been signs that the market for property in Dubai is at least beginning to stabilise, and a report out this week from Standard Chartered is the latest in a series of announcements in Dubai which are suggesting that the worst of the crisis may indeed be over. Whilst it may be too early to start mentioning the green shoots of recovery just yet, factors such as the easing of the major bank’s lending criteria may well be beginning to have an effect.
Philippe Dauba-Pantanacce, Standard Chartered Senior Economist said “The end of the freefall is encouraging. The first signs of stabilisation in Dubai’s real estate sector have appeared, taking observers by surprise since further declines were expected. Some caution is warranted, as there are still question marks surrounding population flows.”
This process of stabilisation is undoubtedly at an early stage, however the major mortgage providers have relaxed their criteria in the past couple of months, and are now offering higher loan to value ratios than were being seen at the beginning of the year. This process has undoubtedly led to an increased amount of activity in the Dubai property market of late.
The traditional summer lull is expected to begin in the next few weeks, which will undoubtedly have an impact on any potential recovery in the short term, however these positive signs do bode well for the long term dynamics of the Dubai property market, and we should start to see more encouraging signs in Q3 of this year.
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June 16th, 2009 at 1:22 pm
I think it is far, far too early to be talking about the green shoots of recovery over here in Dubai. The last few months have been fairly torrid in terms of the Dubai property market, with many investors seeing the value of the apartments and villas falling by as much as 40-45%. This over optimism from the past few years has left people in Dubai with a serious financial hangover, which is unlikely to disappear for a long time.
I think we are still set for a period of volatility, which will continue for the next three months (summer period) at least. In the past, the demand for property in Dubai has been driven by increased demand from an ever increasing population. Today, the emirate is facing net population decline, something which is set to continue during the summer as a large number of expats decide to leave during the summer holdiays.
That said, I do not think it is all doom and gloom, and I think that long term Dubai will offer a strong set of fundamentals which will attract the investors back. This price correction, whilst undoubtedly painful will present long term opportunities as value begins to slowly come back into the market.
I think the key difference this time is that people will be more realistic in their expectations, and that the process of due diligence will be more comprehensive when they buy a property. There will be a tighter focus on basics such as the development build quality and location. These fundamentals, coupled with the gradual increase of credit throughout the property sector in Dubai will allow for a gradual and more sustained growth in the emirate.
Just my fourpenneth!
June 17th, 2009 at 7:26 am
I think you’ve raised a number of interesting points here Danny, and looking at the various reports released over the past couple of weeks, I would have to agree with you. There are a number of good signs coming out of the Dubai property market, but given that seasonality will undoubtedly have an impact over the next 2-3 months, it would probably be prudent to wait until September and re-evaluate.
What I do think is significant is that the gap between property listing values and actual transaction prices is narrowing considerably over the past couple of months. This is showing that people looking to sell their properties are not willing to drop their prices much further, signalling at least a bottoming out of the prices of property in Dubai.
The second significant factor will be the amount of units which are still to come online over the course of the next 6 months, which will also have a significant impact on the prices of property in the Emirate.
June 19th, 2009 at 4:35 am
I do not think that the period of correction is over yet, and we may well see prices drop further over the next few months. Net population flow is critical in the United Arab Emirates, and particularly in Dubai. Given that a large number of expats are looking to leave the region in the next couple of months is certain to have a large impact on overall demand for property in Dubai.
End of year before we see any long term stability, and Q2 2010 before any sustained recovery in prices.