Sustainable UAE property prices by 2009
< Back
News on Middle East
2 July 2008
Property price growth in Dubai and the northern Emirates is expected to reach more sustainable levels by 2010, as more homeowners, rather than property investors enter into the market, according to a leading property developer.
“Driven by Dubai's frenetic and speculative real estate market, the United Arab Emirates' property market has seen unprecedented growth in recent years, easily outpacing the rest of the Arabian Gulf states combined,” said Mohammed Nimer, CEO of MAG Group Property Development.
He added: “The construction boom in buildings is about to peak in 2009, with $3bn worth of real estate either on the drawing board or under construction. From there, the value of the market will fall back to 2007 levels of around $1bn as more units are delivered. That will hopefully subdue rising market prices.”
The MAG Group CEO reports that actual homeowners currently account for just 30% of its total properties sold at launch.
A number of properties for sale in Dubai are still being snapped up by short-term property investors who plan to sell the homes on, with actual homeowners currently account for just 30% of all properties sold by MAG Group at launch, accotrding to the company.
However, the volume of new residential developments being constructed is slowing, and will peak next year, according to data supplied by Proleads. The Dubai-based research company monitors major construction projects across the region from initial planning to completion.
The database shows more than 80 units blocks individually budgeted at up to $100m currently under construction in Dubai and the Northern Emirates with a combined value of more than $4bn.
But the database also shows a dramatic decline in announced new or planned construction of similar buildings throughout next year and 2010 as dozens of projects reach completion.
Nimer said: “Most projects are still under construction and the next wave of supply will be coming in 2009-2010 which may help bring some stability to the market.
“However, this may not provide major relief from rising prices as much of the problem is also due to the ever-increasing costs of land, labour and materials - something not likely to change in the short term.”
The Dubai property market has grown in 2008, with property prices appreciating at a rate not seen since 2004, according to Nimer.
”Prices will continue to go up for the foreseeable future but the non-speculative case for buying real estate - to save on rent and protect capital against inflation - is becoming stronger,” he said.
