Bringing its sky-high real estate prices down to earth could be a silver lining in the cloudy property market forecast for Dubai — which could see as much as a 30% additional decline, and a recovery postponed past 2010. With government programs likely driving current signs of stabilization, inventory surpluses and dismal employment prospects mean recovery is unlikely to be swift, and previous price levels only a distant memory. For more on this, see the following article from Property Wire.
There will be no recovery in the Dubai property market in 2010 with prices falling up to 30% in 2010, according to an economist who accurately predicted the credit crunch.
Eckart Woerts, a senior economist at think tank the Gulf Research Center who is currently lecturing at Princeton University in the US, said the global economy is in for a big surprise and as a result the already depressed real estate sector in Dubai faces more misery.
‘Are we out of the woods in Dubai? I don’t think so.
There are so many projects coming on stream. I don’t see a recovery.
My initial take was a decline of 60 to 80%.
We have had 50% so maybe we have another 10 to 30% to go measured against the old high,’ he says in an interview to be published in Arabian Business magazine on Sunday. (Nov 1)
‘A lot of the crash has already happened, but don’t think about the old highs, because that is a price you will not see for a very, very long time,’ he adds.
Unlike many economists predicting a recovery from the global economic downturn in 2010, Woertz said that a time lag between state stimulus packages ending and real demand picking up will cause further problems in 2010.
‘We have some stabilization going on, but the problem is this is mainly attributable to government spending and stimulus.
But what happens when the stimulus peters out? Because the job market looks awful.
So the spending cannot come from private households under such conditions,’ he explains.
‘For the real economy, we are in for a nasty surprise in 2010.
We could see several consecutive bottoms rather than a miraculous recovery,’ he adds.
But even when the global economy does recover it will not necessarily mean the start of an upturn for Dubai’s property prices, Woertz says.
‘Dubai has high inventories.
Just based on end user demand, without the speculative hype, you can probably have quite a few people moving back to the city without the market moving at all.
The point is, you shouldn’t calculate the price of real estate based on your opinion of the market and the hope that you will sell to a bigger fool than you for a higher price,’ he adds.
But he believes that the property market downturn could prove to be good news for Dubai in the long run.
‘It is good for Dubai that the real estate is going down in the sense that it was pricing itself out of the market.
It is a model trading hub. Dubai does things much more efficiently and better than neighboring countries.
There is a need and demand for business services made in Dubai.
But not at the price of yesterday which needed to be high because of ridiculous real estate prices,’ he concludes.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.