Predictions for Dubai Real Estate Sector in 2010

The latest predictions by a Dubai based real estate consultancy firm reveal that there is still some way to go before things pick up again in the beleaguered real estate sector. Owing to past commitments, there is at present an oversupply of residential units in the emirate, and the still sluggish economy means that the real estate sector will continue to struggle through 2010. Indeed, some experts have stated that they do not expect to see a turnaround before mid 2011.

The present realities of the real estate sector very much reveal that sale prices and rents for villas, apartments and offices will continue to fall. On the average, apartment prices in Dubai are expected to decrease by as much as 20% over the next 18 months. Meanwhile, it has been noted that villa prices in Dubai have also stagnated, showing a marginal increase of just 0.2% in the 4th quarter 2009.

Location is still a key factor, as there is a variance of pricing based on whether the villas are situated along coastal communities such as Sheikh Zayed Road, or further inland where the prices have decreased.

At the other end of the market, sale and leasing transactions for commercial property remained significantly low in Q4 2009 with average sale prices down by 5.1%, and office rents dropping 8.4%. This trend is expected to continue as an estimated 48 million square feet of office space will enter the market over a four-year period.

Possible good news for apartment renters is that average rents are likely to decline as more residential supply is delivered at a time of weak demand fundamentals.

The Government of Dubai has announced a 6 percent cut in state spending for 2010 in response to the strain on its debts in the aftermath of the real estate collapse. State spending is projected to be $9.64bn in 2010, compared to $10.3bn in 2009. Dubai Real Estate sector contributed as much as 50% to the emirate’s GDP in its heyday.

There is a dire need to rebuild confidence and greater transparency in the UAE's fast evolving real estate markets. Although the rate of decline may be comparatively less in 2010 than that experienced in 2009, what is needed for a recovery is stronger economic fundamentals, better long term policies and additional demand from both investors and tenants. Once these are in place, the markets will mature. Investors will also need to change their attitude and take a longer term view, as there will be few opportunities for price spikes as the level of returns becomes more stable and sustainable.

About the Author
John Parker is expert analyst and market researcher on Serviced Offices and Dubai Apartments for Rent Market, he writes Dubai property articles. He works for Kleindienst Real Estates, one of the most growing real estate firms in UAE.

Will 2010 Herald a New Dawn for Dubai?

The opening of the Burj Dubai, the world’s tallest tower, on 4th January 2010 is the best news we have got from Dubai this year. And with the spate of negative news items dominating the airwaves in recent months, such positive news was long awaited and indeed, much appreciated. At long last, here was an opportunity to revel in the ‘superlativeness’ of Dubai once again, a feat that the ruling family would have liked. Smiling for the world media as he did the honors of cutting the ribbon announcing the opening of the tower, Shaikh Mohammad bin Rashid Al Maktoum has long compared Dubai to a Hollywood star. The comparison is both apt and fitting, as the rise and fall of Dubai’s fortunes over the last two years or so very strongly imitates that of a Hollywood icon. Dubai has also been constantly in the news- whether for the right or the wrong reasons. Not very long ago, the debt repayment crisis of Dubai World got the world’s attention. But by first agreeing to support and then withdrawing, the Government of Dubai sent mixed and confusing signals to world watchers. The Western journalists took it to mean that Dubai was itself in danger of default. To their minds, the worst had already happened. Dubai had overextended itself in the property boom market and how the bubble had burst. What probably made the West a bit vitriolic in their comments was that many expatriates in Dubai had to bear the brunt of quick layoffs once the bubble burst, and thus left the emirate with bitter memories.

At present things do look to be getting a bit better, as by some estimates, 60 percent of the previously abandoned housing and construction projects have been resumed- some with new financing, others with new crews, administration and management. The resumption of work means that the employment sector will become alive again, and give impetus to hotels, air travel, taxis, rentals, shopping, banking and a host of other facilities. This time around, some are taking a cautious approach and either coming in on unlimited work contracts or preferring Abu Dhabi or some other emirate in which to work and live. That said it is simply not to be contested that Dubai is still attractive to the visitor, because of its cosmopolitan lifestyle, good infrastructure and acceptance of English as the spoken language.

Meanwhile, the stock market and the financial sector desperately need a boost for Dubai to recover from its present inertia. Maybe the Government will need to change housing, working and economic policies so that they are more obliging and business friendly, as well as protective of jobs and assets.

With the present situation being that supply still outstrips demand in this emirate, there is no shortage of advertisements in UAE property websites. Business is sluggish in Dubai property and will only pick up if the economy is stimulated. Dubai marina and villa properties are the only ones somewhat holding their value in terms of Dubai properties for sale, while Dubai apartments have almost halved in value. While the property and construction sector is definitely in oversupply in 2010, analysts are hoping that property for sale in Dubai will recover by the start or middle of 2011.