Dubai home prices are likely to remain flat this year, although some areas could see further falls of as much as 30 per cent, says the property consultancy Jones Lang LaSalle (JLL). Prices in the emirate surged in 2008 as speculators bought and sold off-plan homes, sending prices up by 43 per cent in the first three months of that year.
Those increases have since been erased, with overall prices down by more than 50 per cent from their peak in the third quarter of 2008. Blair Hagkull, the JLL managing director for the MENA region, said that while prices in established communities of Dubai would remain flat, there could be a further fall of between 15 and 30 per cent for homes in developments that still needed to be connected to utilities and other amenities.
"But to lead with that headline is very much a misnomer for what's happening in the marketplace; the rate of decline has reduced," Mr Hagkull said. He added that as the market matured price changes were becoming more complex. A glut of homes in Dubai would further suppress prices as the prolonged slowdown dampened demand, other analysts predicted. Colliers International said the number of new homes in the emirate was expected to grow by more than 34,000 in the next two years.
Meanwhile, Landmark Advisory estimated that about 2.97 million square metres of new office space would have reached the market by the end of next year, compared with 3.25 million sq metres available today. The oversupply would be more attractive for tenants as rental rates came down further and landlords offered easier payment terms, Mr Hagkull said. Despite the oversupply, there was still a shortage of "A grade" commercial and residential property, he added. "The reality is, we have investors today who are looking for investment grade property like they would find in North America, Asia or Europe," he said.
"There's a lot of supply [in Dubai], but little that meets investment grade criteria, particularly property that is freehold and available to international purchasers." JLL has forecast that as the market matures, developers will start to build "real homes for real people" as they devise longer-term business plans and move away from the "luxury" home model that dominated the market during the boom and mostly appealed to speculators.
There would also be a marked shift away from creating new developments to trying to create value out of existing assets, the firm said. Meanwhile, regional investors will play a greater role in Dubai's property market, JLL predicts. Last year, investors from the Middle East ploughed Dh3.7 billion (US$1bn) into London's property market as they took advantage of lower prices and a favourable exchange rate.
"A lot of global money is going back to its home markets," Mr Hagkull said. * additional reporting by Angela Giuffrida @Email:rbundhun@thenational.ae