Opinion divided over trend in property prices
Opinion is divided on the timing of Dubai's feared property market slowdown. Some analyst say the sector will cool in 2009 while others forecast at least seven more years of growth.
A report from investment bank EFG-Hermes says residential property prices will peak in the second half of 2008, before housing supply overtakes demand - the possible trigger for a 15-20 per cent dip in prices by 2011.
If the expectation proves correct, it will bring to a halt the market's unrelenting price appreciation since 2002 when Dubai said it would allow foreigners to own freehold property.
But the bank's views are far from unanimous among local property analysts. Some say prices will continue to rise for another seven years due to limited supply of new units, lengthy construction delays and demand for real estate among foreign investors buoyed by Dubai's improved property market regulation and the falling value of the dirham.
EFG-Hermes bases its forecast on an anticipated 25,000 new housing units hitting the market in 2007, 64,000 more homes in 2008 and a further 68,000 units in 2009. On the demand side, it predicts a need for 45,000 to 50,000 units per year.
"Supply in the residential property market is and will continue to be constrained in 2007. We predict that the peak year for supply will now be 2009, meaning that the market is unlikely to see a price decline before this occurs," said Sana Kapadia, analyst at EFG-Hermes.
Kapadia said the company expects average prices to rise 10-15 per cent in 2007 and 5-10 per cent in 2008, before entering negative territory.
"Following a peak in the second half of 2008 as more supply hits the market, prices will start to decline again in 2009, with a cumulative decline of 15-20 per cent by 2011," she said.
This trend could trigger renewed demand, assuming that demand is price elastic, she added.
While analysts agree that housing demand will remain strong, they are divided on the key factor of future housing stock.
"I really can't see where the supply is going to come from that will reduce prices in the next five years. There just aren't enough master developments that will be ready," said Iseeb Rehman, managing director of Dubai-based property consultant Sherwoods.
He said units will come on stream at developments including Discovery Gardens, Dubai Marina and Jumeirah Lake Towers, but not in sufficient amounts to satisfy demand.
"Regional liquidity is strong and there is high immigration, while a weak dollar is attracting investment into a more regulated market," he said. "I can't see any real change in growth for the next seven years."
Offering a similar opinion, MEED's Dubai Real Estate Report 2007 says supply of residential properties will total approximately 175,000 new units by 2010.
But an estimated 181,000 units will be required by the end of the decade - an under-supply of 6,000 - suggesting that price appreciation will continue into the next decade. Source
A report from investment bank EFG-Hermes says residential property prices will peak in the second half of 2008, before housing supply overtakes demand - the possible trigger for a 15-20 per cent dip in prices by 2011.
If the expectation proves correct, it will bring to a halt the market's unrelenting price appreciation since 2002 when Dubai said it would allow foreigners to own freehold property.
But the bank's views are far from unanimous among local property analysts. Some say prices will continue to rise for another seven years due to limited supply of new units, lengthy construction delays and demand for real estate among foreign investors buoyed by Dubai's improved property market regulation and the falling value of the dirham.
EFG-Hermes bases its forecast on an anticipated 25,000 new housing units hitting the market in 2007, 64,000 more homes in 2008 and a further 68,000 units in 2009. On the demand side, it predicts a need for 45,000 to 50,000 units per year.
"Supply in the residential property market is and will continue to be constrained in 2007. We predict that the peak year for supply will now be 2009, meaning that the market is unlikely to see a price decline before this occurs," said Sana Kapadia, analyst at EFG-Hermes.
Kapadia said the company expects average prices to rise 10-15 per cent in 2007 and 5-10 per cent in 2008, before entering negative territory.
"Following a peak in the second half of 2008 as more supply hits the market, prices will start to decline again in 2009, with a cumulative decline of 15-20 per cent by 2011," she said.
This trend could trigger renewed demand, assuming that demand is price elastic, she added.
While analysts agree that housing demand will remain strong, they are divided on the key factor of future housing stock.
"I really can't see where the supply is going to come from that will reduce prices in the next five years. There just aren't enough master developments that will be ready," said Iseeb Rehman, managing director of Dubai-based property consultant Sherwoods.
He said units will come on stream at developments including Discovery Gardens, Dubai Marina and Jumeirah Lake Towers, but not in sufficient amounts to satisfy demand.
"Regional liquidity is strong and there is high immigration, while a weak dollar is attracting investment into a more regulated market," he said. "I can't see any real change in growth for the next seven years."
Offering a similar opinion, MEED's Dubai Real Estate Report 2007 says supply of residential properties will total approximately 175,000 new units by 2010.
But an estimated 181,000 units will be required by the end of the decade - an under-supply of 6,000 - suggesting that price appreciation will continue into the next decade. Source
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