An influx of renters from neighboring regions has helped boost the Dubai rental market — which has been undaunted thus far by the excess inventory that is eroding property prices. Most believe housing prices in the hard-hit emirate nation will bottom out by mid 2010 to 2011, followed by a slow ascent to recoup massive losses from the previous peak. See the following article from Property Wire for more on this.
Property prices in Dubai are expected to fall further in 2010 due to oversupply, according to a new poll, but rental prices are rising and expected to hold their own.
Dubai real estate prices set to fall 10% more this year and not recover until 2012 as the resumption of some projects and completion of others weigh on an already oversupplied market, according to the poll by Reuters.
Residential property prices in the Gulf emirate, which boasts the world’s tallest building, have fallen 53% so far from their peaks in 2008 due to the global downturn, according to the median estimate of 17 analysts at banks, investment firms and research institutions.
Only two respondents said house prices had reached a bottom, while three said they expected prices to reach a trough in the first half of 2010, five in the second half and six in the first half of 2011, the poll shows.
Prices are likely to climb 3% in 2012 according to the median. Three out of 14 respondents said they expected house prices to continue falling in 2011 while three out of five said they saw prices rising in 2012. ‘The situation remains highly uncertain with the resumption of some projects by Nakheel and consequent risk of oversupply a major near-term risk,’ said Jarmo Kotilaine, chief economist at NCB Capital.
‘I expect the Dubai market to take an extended period to sustainably stabilize and move around. We may see a period of volatility before prices start picking up again,’ he added.
Investment bank Shuaa Capital expects more than 26,000 homes to be completed in 2010, while Deutsche Bank expects Dubai to be oversupplied by 32,000 new homes by the end of the year.
Transaction volumes in Dubai are lower than expected since the last Reuters poll for house prices in the United Arab Emirates in January because of the disparity between buyer and seller expectations, according to Jesse Downs, director of research and advisory services at property consultancy Landmark Advisory.
‘Sellers need to adjust their price expectations downward before transaction volumes will pick up,’ Downs said.
Property prices in Dubai dropped slightly in March, but oversupply and lack of financing hampered a sustained price stabilization, according to a report from Deutsche Bank.
But on the rental front their are signs of a recovery. Demand from those working in neighboring emirates is helping, according to the bank.
Apartment rents rose 1.1% in March while villa rents climbed 1.3%. ‘We probably underestimated, a year ago, the amount of migration from the other emirates to Dubai that has created a lot of demand,’ said analysts Nabil Ahmed.
He added that a lot of people upgraded for better properties and many moved to Dubai from Sharjah and the Northern Emirates while many Abu Dhabi workers live in Dubai to take advantage of cheaper quality housing.
Meanwhile a new report from property services company Asteco shows that villa rental rates in Dubai remained stable in the first quarter of 2010 compared to the previous quarter.
But the picture is not universal. Apartment rental rates fell 5%, largely due to an increased supply in the market, although some areas such as Downtown Dubai saw a rise of 2%.
Demand for villas was predominantly for those in established locations such as Jumeirah where rental rates remain unchanged over the last quarter and in the Palm Jumeirah and The Springs which recorded slight increases of 5% and 2% respectively, the report shows.
‘As more stock enters the market, this will continue to put downward pressure on rental rates and occupancy which will benefit tenants who are looking to upgrade in terms of quality and location,’ the report concludes.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.