Surprise 25% fall in Dubai property vacancy rate
Posted on 14 September 2010 with 5 comments from readers
In the past three months the vacancy rate for Dubai residential property has shown a surprising fall from 11 to to eight per cent, with around 25,000 units now available for sale or rent compared with 32,000 in June.
This is the conclusion of an analysis of data from the PropertyFinder.ae website by the ArabianMoney investment newsletter which is now exclusively carrying the property analysis that editor Peter Cooper formerly provided for the Freehold Monthly and Property Monthly magazines (click here to subscribe).
Property listings drop
In June there were 20,130 properties listed for sale and 11,797 for rent in Dubai. On September 7th that number had shrunken to 14,984 units for sale and 9,634 for rental.
A full dissection of this data and the reasons behind it is provided in the latest edition of the newsletter whose subscriber base has doubled over the summer. But the fall in Dubai vacancies is the exact opposite of market expectations of a rising oversupply.
The Abu Dhabi market is even tigher with 1,684 units for rent and 1,680 for sale. ArabianMoney thinks this is part of the answer for the surprise data: people working in Abu Dhabi are commuting from Dubai, while at the same time residents who used to rent in Sharjah can now afford to live close to their work in Dubai.
It is also possible that the residential property oversupply estimates are inaccurate. They range from 10,000 to 30,000 units per annum. ArabianMoney suggests that the ’sudden stop’ in the Dubai economy almost two years ago may have stopped more of this supply than previously estimated.
PropertyFinder.ae CEO and founder Michael Lahyani has a different explanation. He says there are simply less property agents listing property in the summer and this distorts the comparison. But he notes that the market does seem to have stabilized with rents and prices still falling but not by very much.
Overall, this seems positive news for Dubai and comes in the week when the stock market has rallied slightly on news that the $23.5 billion debt rescheduling is agreed. But it could still be just a ’sweet spot’ with a possible double dip recession looming in the global economy and a great deal of property still coming up for completion in Dubai.
Commercial space glut
Certainly for hotels, shopping malls and offices the oversupply situation is worsening. Half of the offices in Dubai are forecast to be empty by the end of the year, and there is still more supply to come. Hotel room inventories are mushrooming at a time of lower demand from holidaymakers hit by recessions in their own countries. And smaller shopping malls are empty as buyers choose the big new malls.
Last week the biggest German property developer in Dubai, Alternative Capital Invest, declared four of its seven funds bankrupt, becoming the first major casualty of the two-year old real estate slump in the city. ACI was known for high-rise projects branded by celebrities such Michael Schumacher, Niki Lauda and Boris Becker.
5 Comments posted by readers:
Shrunken???
Or shrunk…..
Data blip for summer…..this dead cat has further to fall.
Interesting news. So when do you think the market will hit the all time low? When is the best time to sign that new tenancy contract and upgrade from the apartment to a villa?
Ed Note: A tough call! There seems quite a long way to go for the real estate market to hit the bottom. We may have already got there for the Dubai stock market (although it will be a bumpy bottom and could range sideways for a year or years). Real estate usually recovers about 12 months after stocks – so that would be our best guess right now – another year for the absolute low point. Again it might still take a year or several for house prices and rents to move off that bottom – but paying off a mortgage then might make more sense than continuing with rental payments. Over the long term houses are a good investment so long as you buy them cheaply first. You normally get at least six months of very low prices with housing so you have more time to think than with stocks. Also the lowest prices for houses will be when interest rates are at a high point in the cycle, so you will not overstretch yourself if you do your mortgage payment calculations at this point and buy what you can afford to pay – indeed you should get falling mortgage payments and rising house prices in the future from that point.
I can assure you from my own market knowledge, and seeing 7 days today i’m not the only one who disagrees with you, your analysis is far from the case. At best this data could be used to confirm a trend, when this data contradicts all other reportsit is simply an anomaly, and an explanation needs to be found for this anomaly, thankfully in this case provided by their own CEO.
Figuring demand for Real Estate in Dubai has lots to do with population forecasts, assessment of communal housing, labour population, estimates on average income, etc etc. The basis of one report can not be used in any serious measure for analysis, especially when the said report gives a perfectly logical explanation as to why this has happened.
Solid facts sometimes produce flimsy deceptions and summer time in the desert is no exception. They seem to believe that a statement here or a newsletter there could actually prevent this market from falling further. “Bumping along the bottom,” not a chance! My guess; we’ve landed on a shelf half way down a very deep hole…and the shelf ain’t for holdin’….
I think property everywhere is over-valued, just look at the UK ! Dubai is releasing one bedroom apartments for 200,000 pounds or 350,000. Yep – over-priced and they should fall by another 10-20%. That being said, I think around 2012 prices will be ar around their lowest point.
Prices will/could also be affected by Asian property crashes, notably ,Seoul, South Korea and the great Chinese boom, which could cause an almighty crash when it plummets into the ground.