Dubai house prices face further decline this year

Dubai house prices will fall another 20 per cent this year, a Reuters poll showed.

Residential real estate prices in Dubai – home to man-made islands in the shape of palm and the world's tallest building – have a less-than-20-per cent chance of picking up before 2011, according to the median forecast of 10 analysts at banks, investment firms and research institutions.

Three of 10 forecasters said they expected prices to hit bottom in the second half of 2009 and three predicted it would happen in the first half of 2010. One forecaster said prices would rise by 10 per cent from now in 2010.

Five analysts expected prices to fall a further 20 per cent or more this year and prices could drop an additional 15 per cent next year before stabilising in 2011, the poll showed.

"We may see a further drop in prices as the magnitude of the problem in the sector is still high and the recovery of the sector may take some more time," said Sajeer Babu, an equity analyst at National Bank of Abu Dhabi, which participated in the June 2 to 9 poll.

Property prices in the emirate have slumped since late last year.

More than half of the construction projects in the UAE worth $582 billion (Dh2.13 trillion), have been put on hold, Dubai-based market research firm Proleads said in February.

Rents in Dubai are seen declining by 40 per cent for the full year 2009 and a further 10 per cent in 2010 before recovering in 2011, the poll showed.

While it indicated that house prices for 2009 will fall at an average of 50 per cent from a peak in the third quarter, it is likely that prices for off-plan properties, or properties still under construction, will fall in excess of that.

Liquidity problems, job losses and additional supply to the market may delay the recovery in Dubai's property sector.

"We believe a recovery is likely in late 2010 or early 2011, with this based on a series of factors which include a decline in demand for buying property," said Sana Kapadia, Vice-President, equity research at EFG-Hermes in Dubai.

"Our house view is that lower or potentially negative population growth is likely to put a strain on demand," she said, adding more clarity regarding the legal framework for property ownership and greater confidence were also needed.

Dubai's population is set to fall 17 per cent this year, the bank said in a report in March. In a previous Reuters poll in March, Shuaa Capital said it expected 80,000 units of supply for the next two years.

Dubai property prices had soared sharply after the emirate opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments.

From the beginning of 2007 to mid-2008, property prices jumped almost 80 per cent, according to Morgan Stanley estimates.

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