Reuter’s poll shows that Dubai’s housing market still has nearly a third too much supply and prices will plummet as a result which means prices will have fallen by almost 60 percent since the economic downturn affected Dubai’s real estate market in 2008.
Prices in Dubai, which boasts of the world’s tallest building and manmade islands in the shape of palms, will fall 58 percent from a peak in the third quarter of 2008 according to the median estimate of 11 banks, investment firms and research institutions who took part in the poll.
Poll respondents saw zero chance of Dubai’s residential property market recovering in 2011. They gave just a 25% chance of recovery in 2012 and only 50% for 2013. Only one respondent said house prices in Dubai have already reached a bottom, while three said they expected prices to reach a trough in 2011, while others said 2012 or later. In percentage terms, the Dubai housing market crash is set to be nearly double the size of the fall in the US, which is down by about a third from its peak.
Oversupply in Dubai remains a major problem. Some 18,000 new homes expected to hit Dubai’s market by the end of the year according to property consultancy Jones Lang LaSalle. Neighboring Abu Dhabi, the capital of the United Arab Emirates and home to most of the country’s oil, had fared better during the downturn but is now facing challenges with a huge supply of high end homes that are expected to enter the market. Prices in Abu Dhabi are expected to fall another 15 percent taking them 55 percent from their peak, the median estimate showed.
The UAE federal government last month announced that it would give a three year residency visa to property buyers in the UAE instead of the six month visa, a move seen as an attempt to lure investors back into its struggling real estate sector. Nevertheless, there are conditions attached such as a minimum investment of AED1 million. Rents are also expected to fall by 5 percent or more in Dubai in 2011.