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Property prices have yet to bottom out, say analysts |
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Wednesday August 5 2009
The UAE real estate market may see further drop in prices as most
properties are still overpriced and the occurrence of real recovery
remains difficult to predict, industry analysts told Emirates Business.
"With
regard to the UAE real estate market, it is possible that we will see a
further drop in prices," said Chris Dommett, Chief Executive Officer of
John Charcol Middle East.
He said the industry is currently
seeing buyers who are prepared to pay higher than the official
valuation for certain select properties, which suggests a possible
recovery from the distressed selling of a few months ago.
"However,
it is still too early to call this a recovery, and I believe the
post-summer and Ramadan period will be important in deciding which way
the market will go," Dommett said.
Nabil Maaloul, CEO of Gulf
Merchant Bank, said the property sector will still see a more
reasonable correction as the real estate market has not yet bottomed
out.
"Comparing the correction in the largest cities in Mena
to the correction we have seen in Europe or in some large cities such
as Paris, London and Berlin, the real estate is still overly priced in
the region."
Real estate consultancy Colliers International's
most recent Dubai House Price Index for Q2 2009 indicated a nine per
cent decline in the overall value of residential properties between
April and June this year.
The index, compiled using mortgage
transaction data from financial institutions accounting for 60 per cent
of the mortgage market in Dubai, also demonstrated a 48 per cent
year-on-year decline between Q2 2008 and Q2 2009.
It said that
at the end of Q2 2009 property prices in the emirate had returned to
approximately the same level as those recorded in Q2 2007, and were
down 50 per cent from their peak in Q3 2008.
Investors' confidence also remains negative.
According
to Shuaa Capital's June GCC investor confidence survey, only 19 per
cent of investors believe the UAE real estate market has bottomed out
despite a jump in investor sentiment.
In its most recent report
in July, the investor confidence remains low. "Real estate,
construction and materials continue to struggle in the eyes of
investors with a balance similar to June's -20 per cent," it said.
"We
could also see the start of a gradual recovery, but this will depend on
a sustained period of confidence and job security," Dommett said.
"For
such a new market, it is difficult to find comparisons when deciding if
property is overpriced, and the usual rules of supply and demand will
apply."
"That usually means that well-built property in
established and well located communities will be in demand, while
incomplete or poorly located property will struggle to find buyers at
any price," he added.
Source: Arabian Business
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