Dubai property prices tipped to fall next year

The Cambodia News.Net
Wednesday 2nd July, 2008

After a 78% increase in prices in the past year, housing units in Dubai are tipped to fall back to 2007 levels.

Considerable new supply is expected to come on to the market next year and in 2010, more than matching the current growth in demand.

New concerns about the surety of residency visas being offered with unit sales, routine delays of up to eighteen months in the scheduled delivery of projects, and antics involving some developers changing the rules along the way, have dampened the red-hot market.

Some projects sold off-plan, in some cases years ago, have yet to commence construction. In one case an apartment tower has been on-sold midway through construction, despite having been sold to individual buyers. Another developer decided not to proceed with a project because prices had climbed so dramatically that the proposed apartment tower could be renamed and re-sold at much higher prices.

There have also been some high profile arrests in the property industry, related to fraud and deception, which have also weighed on the sector. A warrant has been issued for Abid al Boom, who owns Abid Al Boom Management and Development Properties, along with eight other people after complaints of fraud from investors.

The company's offices have been ordered closed, and its assets frozen.

A Dubai-based Arabic-language newspaper reported that a committee that investigated Al Boom concluded the company had collaborated with a number of foreigners to defraud investors, and that its portfolio was bogus.

RERA, the newly established Dubai Real Estate Regulatory Agency has been kept busy with complaints. The latest debacle involves the Jumeirah Beach residence project where the developer is under fire for not building beach clubs and gymnasiums that it promised, and is busily creating an open-air bitumen car park for 500 cars on the beachfront in front of the 40 JBR towers (which comprise 7,000 apartments), where it said it was going to create grassed areas and recreational facilities.

Conflicting views in the real estate market in Dubai see some sources quoted as saying the market will remain strong for at least the next decade.

Rental yields however, traditionally at 10%, are falling markedly mainly as a result of the sharp run-up in prices. Yields on high end property have recently fallen below 5%.

The MAG Group (Moafaq Al Gaddah Group of Companies) sees the forever rising prices of real estate in past years peaking next year. Mohammed Nimer, MAG's CEO said Wednesday real estate projects under construction would peak to 11 billion dirhams ($3 billion) by next year, and then fall back to the 2007-level of 3.67 billion dirhams ($1 billion) as more units come on stream.

'That will hopefully subdue rising market prices,' he said, pointing out that actual homeowners presently account for only 30% of the properties sold at launch. The sales are being dominated not by end-users, but short-term investors, resulting in inflated prices, he said.

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