UAE Property Markets Could Benefit from Political Turmoil in Gulf and Middle East

Abu Dhabi and Dubai are likely to benefit from political unrest in other parts of the Gulf by way of the property market. The area is seen as …

Abu Dhabi and Dubai are likely to benefit from political unrest in other parts of the Gulf by way of the property market. The area is seen as a safe haven in the region for investors. Read more about this in the full article from PropertyWire.

Property markets in Dubai and Abu Dhabi are set to benefit from the political turmoil in other parts of the Gulf region and Middle East as they will be seen as safe havens, it is claimed.

But prices in Dubai are set to plummet another 10% before they stabilise, while prices in Abu Dhabi will drop another 20%, a new poll has found.

Dubai will see prices plunge a total 65% from their peak at the end of 2008 peak, according to the median estimate of 12 banks, investment and research firms polled by Reuters. They will fall by 5% in 2011 and another 1% in 2012, medians showed, with only a 40% median chance they start rising again by 2013.

The same analysts calculated prices in Abu Dhabi will fall 55% before they start to recover, and expect them to drop 11% this year and another 7% in 2012. The problem remains oversupply and not enough buyers, even after such a dramatic drop in prices.

‘Nearly 20,000 to 25,000 units are expected to be delivered in Dubai this year, which should pressure prices in older areas further,’ said Ambereen Jiwani, research analyst at Securities and Investment Company.

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But social unrest in neighbouring countries will have a positive impact on the United Arab Emirates’ market, all respondents said, as the country is seen as a safe haven for investors in the region.

‘Regional unrest highlighted again Dubai’s status as a safe harbour. We expect foreign money in some of these countries to be withdrawn and reinvested in Dubai. The real estate sector could benefit from this,’ said Nabil Ahmed, real estate research analyst for Deutsche Bank.

And separately Khalaf Al Habtoor, chairman of Al Habtoor Group, said that Dubai has emerged as a magnet for investors fleeing widespread political unrest across the Middle East. ‘There is a lot of demand for property now. Dubai and the UAE is a safe haven for a lot of people in the region, he explained.

‘The inflow cash flow is improving. Property is definitely going to improve. Egyptian businessmen they will move their offices in the UAE and especially to Dubai. Take others like Syria and Bahrain, definitely they are moving and we can see that already,’ he added.

The Reuters poll also found that Dubai’s real estate market is oversupplied, which is putting pressure on the prices, a median of eight respondents indicating it is 28% over supplied.

‘Both Abu Dhabi and Dubai are facing an aggressive deleveraging process as well as a too ambitious number of deliveries,’ said Patrick Rahal, manager for asset management at The First Investor bank in Doha.

‘This will lead to demand supply imbalances even if the current socio-political unrest in MENA may have a favourable impact on demographics,’ he added.

Abu Dhabi, capital of the United Arab Emirates and home to most of the country’s oil, fared better during the downturn but house prices have still fallen 55% since the end of 2008.

Residential rents in Dubai are seen falling 10% in 2011, and 2% in 2012, according to the median forecasts in the poll. Rents in Abu Dhabi are expected to fall 13% more in 2011 and another 10% in 2012.

This article was republished with permission from PropertyWire.

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