J.P. Grobbelaar, director of
research and advisory at Colliers International, a real estate
consultancy, said high levels of speculation in residential and
commercial properties prior to the crisis exaggerated the downturn. His
comments came on the second day of the Ministry of Economy-sponsored
Abu Dhabi Outlook Summit.
"The downturn in the property market
was expected for some time," said Grobbelaar. "No one expected it was
going to be as severe, but it had to happen. In many ways the
correction was a good thing for the market because we are now returning
to fundamentals."
Grobbelaar said a healthy recovery of local
property markets will have to be based on supply and demand, factors
which developers seem to be relying on more now rather than speculation.
Residential
rent values in Dubai have declined by 38 per cent since the beginning
of the year according to HC Securities research. Abu Dhabi has seen an
18 per cent drop, according to Colliers.
Investor activity
Analysts point to the recent increase in investor activity in both markets as evidence of initiation of recovery.
"It
seems like the market is being driven by excess liquidity and easy
monetary policy," said Majid Azam, Middle East and North Africa real
estate analyst for HC Securities. "With low interest rates and a
depreciating currency, money is moving out of the banks and into real
assets, including property."
He said the oversupply of
residential units in Dubai and undersupply in Abu Dhabi is causing a
"spill-over effect" from the latter and slowly transforming both
markets into one.
Source: Zawya