Residential prices for Emaar Properties's signature Downtown Burj Dubai development have fallen by at least 22 per cent, with reductions of up to 50 per cent within the Burj Dubai tower itself, according to property brokers. Some high-end developments in Abu Dhabi are also recording significant price declines in the secondary market, where properties change hands after being sold by the developer. The price corrections underscore how the credit crunch and prospects of a global recession are affecting the property market, particularly high-end developments. According to statistics from the international estate agents Hamptons, which is owned by Emaar, prices in the Downtown Burj Dubai area rose 88 per cent in the year to September. Other brokers said some prices more than doubled. "This is indicative of the whole marketplace," said Vincent Easton, the head of sales at Sherwoods property agency in Dubai. "Downtown [Burj Dubai] had quite a sharp spike in pricing. Anything that has a sharp spike is open to a correction if the market slows. Really, ultimately we will see the correct level." Sherwoods, which closely monitors transactions at the development, said it had observed an average decline of 22 per cent, excluding the Burj Dubai tower. Prices in the tower - scheduled to become the tallest in the world - increased the most, and have subsequently fallen sharply. Prices outside the tower fell from an average of Dh3,500 (US$952) per square foot to Dh2,700, Sherwoods said. "When you exclude Burj Dubai from the area, you get a more realistic idea of the decline in the development," said a market research officer at Sherwoods. Flats on 8 Boulevard Walk, for instance, dropped from Dh3,300 per sq ft to Dh2,500 per sq ft in three weeks - a 24 per cent decrease. Sujeeva De Silva, another Dubai-based property consultant, said prices in the Old Town quarter of the development had fallen 30 per cent in the past month, along with nearly 20 per cent at the South Ridges and Residences areas. Price fluctuations in the Burj Dubai tower had been far more volatile because of the high percentage of speculators owning the properties, brokers said. Some had since been sold at significant losses to generate cash, they added. The most expensive floors, such as those branded by Armani, sold at about Dh14,000 per sq ft and were holding much of their value. "Burj Dubai area was supposed to be the hottest and highest selling area. Now things have changed. The owners over there are in distress. They are desperate to sell with zero premiums, or minus premiums," said Juned Ali, a senior property consultant at Alamfa Real Estate. Mr Ali said that many short-term investors feared they would forfeit on looming payment deadlines. Parthasarthi Reddy, the client relations manager at Zagy Properties, a brokerage firm based in Dubai, said the prices of units in Downtown Burj Dubai had suffered the biggest drops in the city so far. Emaar declined to make a spokesman available to comment on the Burj Dubai project. Downtown Burj Dubai is Emaar's flagship project, a mixed-use urban development that includes high-end residential properties, office space and retail. The centrepiece of the area that will spread across 200 hectares is the iconic Burj Dubai, due for completion next year. The project is close to the Dubai International Financial Centre and includes Dubai Mall - one of the largest shopping malls in the world - which opened earlier this month. "Once Burj Dubai is completed, the inner circle of 25km in the emirate will be one of the dearest residential areas in the world," Dirk Sassen, a shareholder in the German property investment fund ICT, said in June. Abu Dhabi's high-end developments have also been affected. As is the case in Dubai, properties in projects that drew the most attention from speculators last year have recorded the most pronounced declines. Brokers said that many of the buyers appeared to have no intention of holding on to the property long enough to make the first required payments to keep possession of it. "Al Reem Island has seen quite a harsh reality check, because that was a real speculative market," Mr Easton said. "You had actually 95 per cent speculators who had no intention of doing further payments. Residential properties in some cases [are now put into the market] at minus 15 per cent premium." According to Susan Cronin, the general manager of Aljar Properties, a broker based in Abu Dhabi, only prices involving bulk deals have decreased. "A floor of offices that was offered in Al Shams Abu Dhabi at Dh2,500 per sq ft three weeks ago is now being offered at Dh2,100," she said. Investors who bought properties on Reem Island at up to Dh2,700 per sq ft during Cityscape in May are expected to be the hardest hit if they intend to resell now. "Someone who is looking to exit today will have no choice than resell at around Dh1,800 per sq ft," Mr Easton said. "The best thing people should do if they can is to hold." "Burj Dubai is an amazing area, but it will take a little more time [to make money]. You should have a capacity to hold on to it. This is not the seller's market any more. It has become the buyer's market now," Mr Ali said. ngillet@thenational.ae * Additional reporting by Sarmad Khan
