Is the Dubai property market stable or are prices going lower?

Dubai property prices have remained relatively stable recently as inventories of property for sale have fallen since the crash hit last year, according to a new study published today by the Landmark Advisory.

‘This fall in inventory is a critical point. While the aggregate number of completed units in Dubai increased, the actual inventory, or units available for sale or lease, has decreased over the past year,’ said research director Jesse Downs.

‘Potential buyers are focused on views, location, quality and finishing,’ she added. ‘Investors and end-users are increasingly considering the opportunity cost associated with a particular investment; in other words, carefully weighing the merits of selecting a particular unit or development over another.’

However, ArabianMoney can only agree with the final conclusion offered by Ms Downs, ‘although inventory trends explain the recent price trends, the long term market fundamentals do not support permanent stabilization for the vast majority of assets in Dubai. In order to stimulate transactions, prices must decline.’

There are plenty of good reasons to be patient about buying Dubai property. Swiss bank UBS forecasts another 30 per cent decline in prices from peak levels over the next couple of years, mainly due to oversupply. The inventory might not be there right now, but it is surely coming up with tens of thousands of units set for completion.

Legal disputes

Dozens of outstanding legal disputes are holding back the sale of other units that will be dumped on the market as these cases are resolved. Then there is the Nakheel debt problem. If banks agree a deal then the blight hanging over this developer’s property is removed and more of it will likely come on to the market.

Besides the global pattern of real estate crashes is for a sharp downturn followed by several years of base building until a recovery happens. The stabilization of inventories seen in the Landmark study is just not the end of the story, and more of an interim stage on the way down.

Of course, what would help enormously is a sudden recovery in the global economy that would give a trading hub like Dubai a nice uplift thanks to higher oil prices. But then a double dip recession is far more likely to depress local real estate further over the next couple of years.