Cityscape, World's biggest real estate investment expo opens in Dubai as growth slows

Cityscape Dubai, the largest business-to-business real estate investment and development event in the world, opened today amid news that Dubai house price growth slowed to 16% in the second quarter of this year.

In an earlier version of this story, Property Wire incorrectly cited a report by Colliers stating that Dubai property prices fell by 16%. Colliers actually said that the house price growth had slowed down to 16% in the second quarter. Property Wire regrets the errors and the story has been amended to reflect the accurate figures.

The figures were met with an intake of breath as they had been rising sharply and although analysts have been predicting a slowdown few expected such a drop at this time.

The figures, from leading international property consultants Colliers, indicate that Dubai's six year property boom is at an end with the company predicting figures will remain flat for at least 12 months, probably until 2010.

'In the first quarter, the average price went up by 43% while in the second quarter they (slowed to) 16%,' said Ian Albert, a regional director at Colliers International. He attributed the drop to seasonal trends and a possible inkling among investors of the looming credit crunch.

Colliers said the main threat to house prices was liquidity in the financial system. A shortage of cash has already doubled the interest rate that banks charge each other in the last four months to more than 4%. Many home finance companies have restricted the amount of money they lend to 65 or 75% of the property's value, and home finance rates have risen to about 8%.

'Future performance will be hinged on liquidity. Everyone in Dubai is now looking for the magic figure on how much prices will fall, but because of what's going on in the US and Europe, we won't know where we are in terms of liquidity for at least another two to three months. Prices have so far mainly appreciated through speculation,' added Albert.

He concluded that although mortgages will be harder to come by, demand would remain strong, with the market moving away from off-plan speculation and back to basic fundamentals, such as providing a good quality product.

The news should be taken as a wake up call but should also be seen as an opportunity to look at other markets. 'Now, as the world faces up to market uncertainty, we enter a new era in which Middle East developers are expected to maintain and even increase their presence throughout the world,' said Rohan Marwaha, managing director of Cityscape.

'The sheer scale and intensity of the iconic projects in one of the most impressive property booms in modern history has kept the UAE, and Dubai in particular, in the headlines worldwide for the best part of a decade,' he added.

Dubai's largest developer, Nakheel, defied the pessimistic news by launching the world's tallest tower. Nakheel, part of the Dubai World group, unveiled plans to build a tower that will be more than one kilometre high - eclipsing the current tallest tower in the world, Burj Dubai.

Nakheel declined to disclose the project's costs, but said it was confident of weathering the financial storm, particularly as the project would be phased over 10 years. 'We know that the world is experiencing a financial crisis right now. But this is jut part of a normal economic cycle,' said Nakheel's chief executive Chris O'Donnell.

'It will have an impact on the Middle East but our view is that it will be relatively small as the fundamentals in this market make it stand out compared to other markets. There might be a slowdown but there definitely won't be a crash. We are confident that over 10 years we will be able to finance, build and develop this project,' he added.