September 2 2009

Average prices of residential properties in Dubai fell by 24 per cent in the second quarter of 2009, with the rate of decline now slowing, according to Jones Lang LaSalle Mena.

There has been a convergence between asking and achieved prices, with residential property market showing signs of renewed confidence, the global real estate consultancy firm said in a second quarter report on Dubai residential market.

Moreover, transactional volumes remained stable between the first and second quarters.

There has been a lower rate of rental decline than before, with the average rent for two-bedroom apartments falling by 15 per cent in the second quarter, compared to a 22 per cent decline in first quarter.

New residential supply continues, with 22,400 residential units expected to be handed over in 2009, in spite of more than $24 billion (Dh88bn) worth of residential projects being put on hold or cancelled.

On the demand front, transactional volume remained stable between first and second quarters in comparison to the 58 per cent decrease between the second quarter of 2008 and the second quarter of 2009.

Craig Plumb, Head of Research at Jones Lang LaSalle Mena, said: "The stabilisation of transactional volumes is an important indicator, which reflects improved confidence among investors.

"The narrowing gap between asking and achieved prices is a further indication that the market is beginning to stabilise, albeit at significantly lower levels of pricing than those seen earlier in the year."

He said: "While there have been a large number of projects delayed or cancelled, there remains a significant level of new supply, with 22,400 residential units expected to be completed across Dubai in 2009."

In a report released on Mena real estate last week, JP Morgan said Dubai was likely to see a surplus of 31,000 residential units, mainly due to the decline in the expatriate population.

"In the short term, we expect the non-residential sector in the UAE to remain under pressure given the global financial crisis. However, the historical shortage of both retail and commercial space in Abu Dhabi has kept falls in leasing rates well below Dubai's," the investment bank said.

Despite a slight recovery, transaction volume for land parcels still remains well below peak levels in the fist half of 2008, where total monthly land sales reached $3.5bn.

Land transaction volumes have come off substantially with lack of investor appetite for non-income generating property and slow down in construction projects, as small and medium-size developers face cash flow challenges, JP Morgan added in the report.

Source : Emirates Business 24/7