Jones Lang LaSalle reported slight gains in United Arab Emirates (UAE) residential real estate prices and sales, but experts predict oversupply will drive prices and rents down 20% through 2011 and 2012. Experts also blame global economic instability for investors’ hesitance to reenter the UAE housing market. A CBRE report shows price falls in every sector as landlords and owners offer rents and sale prices far below the market average in an attempt to make the best of a bad situation, but is feeding competitive pricing in a race to the bottom for value. For more on this continue reading the following article from Property Wire.
Property prices and rents in the United Arab Emirates may drop a further 20% this year and next because of excess supply, according to analysts.
Meanwhile the latest data from CBRE shows that sales transactions in Dubai fell 45% in the third quarter of the year, adding another blow to the emirate’s already battered residential property market.
‘There is a further leg down to the UAE property market before residential prices and rents recover,’ said analyst Mohammad Kamal of Arqaam Capital.
‘We see a further 15 to 20% in downside to prices and rents in financial year 2011 and 2012,’ he added.
Claim up to $26,000 per W2 Employee
- Billions of dollars in funding available
- Funds are available to U.S. Businesses NOW
- This is not a loan. These tax credits do not need to be repaid
The CBRE report shows that the number of residential sales fell 1,459 in the quarter, down from 2,648 in the year earlier period, despite rents in the emirate’s prime developments showing signs of steadying.
‘There’s a lot of uncertainty in the market still. Despite stabilising prices, there is still reluctance to get back into the market, certainly on the investor side. At the moment, people are still slightly risk averse,’ said Matthew Green, head of research and consultancy at CRBE.
Apartment rents fell 1% from the second quarter, with the year on year fall at around 19% hit by the release of new properties across Dubai. The decline has seen landlords in some developments drop rents below market rates in a bid to fill their properties, CBRE said in its third quarter MarketView report.
‘The availability of properties at competitive rates is forcing landlords to offer properties below market rates in order to reduce void periods and neutralise the loss of income through service charge dues,’ the report says.
Although villa properties continue to outperform apartments, lease rates fell 10% year on year with smaller houses worst hit by the declines, the report adds.
Average lease rates for two bedroom apartments fell 26% year on year, reflecting an oversupply of townhouse units in Jumeirah Village and the Mirdiff area, CBRE said. Five bedroom villas saw a 2% year on year fall.
Jones Lang LaSalle said in September the emirate had shown small signs of recovery with house prices increasing in prime areas and the number of transactions rising. But analysts remain concerned that the estimated 33,000 new homes expected to hit Dubai’s market by the end of 2012 could cause fresh declines in rental and sale prices.
Analysts have warned that Dubai risks developing a two-tiered property market with villas and apartments in poorly maintained developments proving difficult to rent out or sell.
Prices in Dubai’s Discovery Gardens fell 10% in the third quarter as developer Nakheel released new units to the market at rents that undercut owners, Asteco said earlier this month.
This article was republished with permission from Property Wire.