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Progressive fall in Dubai house prices over twelve months.

Most Dubai property consultants are in accord with the view that house prices in the Arabian Gulf's

prime tourist destination have fallen over four straight quarters, with a fifth imminent. For even

a shortfall in the number of new developments supposed to complete and handover in 2015, down 50 per

cent against target according to expert witnesses, has failed to stem the decline.

The property sector in the United Arab Emirates (UAE) in general has proved among the most volatile

globally during the last decade, producing a boom-bust-boom swing of momentous proportion. While

prices have never recovered to the stratospheric values of H1 2008, in the wake of an average

plunge of 50 per cent rising to 70 per cent in some cases, there have been several buoyant years in


However, any number of analysts predict that the Dubai market is likely to fall by a further 3 to 5

per cent over the next twelve months. While some of a gloomier, but potentially more pragmatic

persuasion, foresee a drop significantly closer to the double-digits of the past year by the end of

that period.

Being brutally honest global economic conditions are not conducive to mass property investment in

the Middle East with oil prices are at their lowest ebb for several years amidst a hydrocarbon

glut. Although energy is not Dubai's primary source of income, the current fall affects the UAE as a

whole, with Abu Dhabi, the 6th largest producer in the world, both the seat of government and a key

source of national funding.

Remembering that when Dubai's financial situation was at its most dire in 2009, it was Abu Dhabi

that loaned the cash strapped emirate US$ 20 billion from a healthy oil revenue surplus and more

recently agreed to rollover the loan in March 2014 at a lower interest rate. Undoubtedly, given a

similar predicament this time round the outcome might well be dramatically different.

Meanwhile, expatriate run SMEs and indeed job opportunities in Dubai are under the cosh and

shrinking, thus demand for office space remains weak overall with even prime Class A buildings

beginning to shed tenants. Business Credit and loan defaults are on the rise, while local banks have

had to shoulder significantly more of the project lending burden during the secondary property


Dubai is a city state within the UAE with an area of 1,588 square miles (4,110 square kilometres) a

sizeable portion of which is desert. However, with a population similar to that of Rome at around

2.6 million and far fewer attractions, it actually outstrips Italy's tourist magnet in terms of

accommodation by some distance. According to hospitality analysts with 68,500 hotel rooms likely to

be on offer in the city by the end of 2015, leading to a predictable decline in revenue per

available room as new properties come on stream.

Specifically looking at the property sector, developers have a large number of work-in-progress

projects still to be delivered to market increasing the supply of residential units against falling

demand. Estate agents forecasts of future deliveries in Dubai sit at circa 7,500 completed units to

be handed over in 2016, a further 10,500 in 2017 and 13,600 units in 2018, with houses making up

just under half of the properties involved.

Couple all this with the fact that conflict and political instability continues to rage across the

Middle East, then the economic models and associated budgets across the Arabian Gulf states are

under increasing duress.

Overall Dubai property prices have fallen by more than 12 per cent over a twelve month period, with

a further 4 per cent expected in the final quarter of 2015, therefore predicting a further fall of

only 3 to 5 per cent in the coming year would seem an understatedly risky projection.

That said from an investment perspective Dubai property is now becoming increasingly cheap compared

with New York and London as the per square foot price on older existing villa properties continues

tumble, which has become more noticeable at the luxury end of the market.

Copyright [c] Andy McTiernan. All rights reserved. Provided by SyndiGate Media Inc. ( ).
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Publication:Andy McTiernan Property & Economy Bulletin
Geographic Code:7UNIT
Date:Aug 5, 2015
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