How low will UAE house prices go and when to buy
Posted on 03 October 2010 with no comments from readers
Dubai apartment prices fell by an average of six per cent in the third quarter, according data just released by estate agents Asteco. By contrast villa prices were unchanged in the same quarter. Rentals on apartments also fell six per cent and villa rentals by an average of four per cent.
The report said demand for villas seemed likely to increase in Q4 with some tenants looking to move from apartments to villas. It judged the rental and sales market for villas more robust than apartments as the upcoming supply of villas is far less.
Jones Lang LaSalle says that 9,000 more apartments will be completed this year bringing the total additional supply in Dubai for 2010 to 30,000, and 35,000 more apartments will be dumped on the market next year. Villa completions will be a tiny fraction of that number.
Is it possible that villas will now start to rise in price, while apartment prices and rentals will continue to fall? This would appear logical as many prefer villas over apartments and there are less of them in the marketplace but the fall in apartment prices will likely drag villa prices down too.
Abu Dhabi different?
In Abu Dhabi landlords of prime buildings are still able to command high rental prices. But Asteco reports that overall prices have weakened slightly. Prime buildings saw rents fall seven per cent with lower quality buildings dropping 10 per cent in Q3. Asteco expects this trend to continue.
The overall picture in the UAE is still a falling market with some signs of stability in the most highly rated locations. Downtown Dubai and The Meadows in New Dubai remained unchanged in price in Q3, for example, and agents are actively seeking properties in these locations.
The number of properties in Dubai for sale or rent on the popular listings website www.propertyfinder.ae is currently just over 27,000 compared with 32,000 back in June. That said there is a tremendous backlog of apartment inventory waiting to hit the market as schemes are completed.
The northern section of the Dubai Marina, for instance, has a collection of towers from 80 to 100 storeys high that are all close to topping out. The 580 apartments of Damac’s Ocean Heights will be handed over next month. Meanwhile, the out-of-town developments along the Emirates Road are also a vast inventory that is almost finished, and the Palm Jumeirah is jammed full with mainly empty apartment blocks.
Massive apartment inventory
When this stock will be delivered and whether the market will be able to absorb it is bound to be on the minds of property investors at the Cityscape Global exhibition and conference in Dubai this week.
In the past periods of overbuilding in Dubai have always been met with a huge reluctance to discount rentals by mainly national landlords. But with so many foreign owners in the market now, and some with mortgages to service, this factor is not going to count for as much as in the past.
Certainly it is pretty clear that the best bargains will only emerge when the market is most flooded with property, and that does not appear to be right now. Then again for villas the market dynamics may be rather different with prices already close to the floor.
Slow motion crash
What started in Dubai two yeara ago as a very rapid price crash – with rentals and prices off 50 per cent in six months – is morphing into a more slow motion contraction with periods of relative stability.
How low this market finally goes is also dependent on things like the speed of the global recovery and how it impacts on oil prices, trade and tourism. And that is more difficult to predict then the speed of delivery of the upcoming supply of property.
But it looks like the best counsel is to wait-and-see. The best bargains will still come in a couple of years’ time when the oversupply is at its most extreme.
