Dubai property prices almost near 2008 peak levels: S&P

Residential property prices in Dubai are almost reaching 2008 peak levels, with the market not likely to see any major price correction in the short term, Standard and Poor’s, a global ratings agency, said on Wednesday.

“We have seen growth and strong performance of real estate in Abu Dhabi and Dubai over the past two years. If we look at the Dubai’s residential sector, we are now more or less at the peak levels seen in second half of 2008,” said Tommy Trask, Director, Corporate Ratings, S&P.

“We don’t foresee a major correction in the short term, but we think that the evolution of the medium term is going to be determined by more of supply than demand. Though it is growing, there is a risk that supply may grow quicker than demand.”

The real test, Trask believes, for the market will be in the coming few years.

“We think the market will be tested in a couple of years of time when we see handover of units that have been marketed over the last two years and a new pipeline building up.”

Referring to difference with the past, Trask pointed to the new Federal Mortgage Law, new regulations for developers/contractors and Dubai increasing transfer fee charges.

“We have some initiative from the regulatory sides… we have a federal mortgage law limiting the LTV (loan-to-values)  on mortgages, the escrow law and regulations for contractors/developers and Dubai increasing (transfer) fee to 4 per cent to cool down the real estate sector… these measures had some impact.”

What hasn’t changed back, Trask said, was the strong economic growth being witnessed then and now.

“We see the same scenario today… a strong economy,” he added.

Earlier this year, the International Monetary Fund raised its 2014 economic growth forecast for the UAE to 4.5 per cent, but had warned of a potential property bubble if authorities were not careful.

Construction accounts for about 10 per cent of Dubai’s gross domestic product (GDP), while real estate and business services stands for 20 per cent of the GDP.
 

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