Wednesday, December 2, 2009

Residential Property Prices in Dubai May Slow Down in 2010

Residential Property Prices in Dubai May Slow Down in 2010

According to industry analysts, house prices in Dubai are likely to moderate in 2010. Although the prices may begin to return to reasonable levels towards next year, a considerable difference may not be noticed.

Several analysts and reports have given out their predictions that the demand-supply situation in Dubai will attain a balance by 2010, with the bulk of units likely to hit the market by that time, coupled with the Dh.6billion escrow accounts.

With the on-going delay in supplies continuing to plague the industry, any demand-supply balance cannot be expected until 2010. As per the real estate price index in Dubai, an appreciation of 40.8 percent has been noticed in the residential sector year after year, while the prices in commercial sector have risen by 42.7 percent during the same period.

Average rent rate in Dubai during June 2007 was Dh.1291 per Square Foot, while it was Dh.1,818 in June 2008, marking a one year increase of 40.8 percent. Better quality housing is noticed in central locations, which are well-maintained with good infrastructure. Such housing has always demanded and is expected to demand higher rents in future.

The rate of increase in residential prices during the past five years has not been sustainable, with the price being of topmost concern. Locations such as the Jumeirah Lake Towers and Barsha with good quality accommodation and good links to public transport have seen maximum increase in prices.

Even places adjacent to Dubai Metro would turn out expensive, as people would prefer to live close to a station. As for commercial properties, an average rent of Dh.1444 per square foot in June 2007, while it was Dh.2060 in June 2008. This marks an increase of 42.7 percent.

The rents would continue to increase for the next one year, if not for two years, or unless more supplies arrive at the market. Due to increasing cost of materials, developers have been compelled to go slow on development plans, causing delays in the market.

Properties which were likely to arrive in the market in 2009-10, have now been extended to 2011-12, he pointed out. Analysts predict that prices in Dubai property market are likely to reach their peak during later half of 2008 before falling down, as against the predictions last year that property rates in Dubai would drop down in 2008.

Also expect an increase of 5 to 10 percent in 2008 in property prices. Towards the year 2009, property prices in Dubai will witness a downward journey, resulting in a dip of 15 to 20 percent by 2011.

However, everything would depend on the arrival of completed housing projects into the property market. Also, the expected property boom in Dubai is hoped to continue till end of the decade.

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By Mahendra Dey

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