Wednesday, 29 April 2009

40% decrease of Dubai property in Q1 2009 - Colliers International

Colliers International, the global real estate consultancy, has released the Dubai House Price Index (HPI) for Q1 2009, which indicates a decline in the overall index of 41% for the first 3 months of 2009. The index, compiled using mortgage transaction data from financial institutions accounting for 60% of the mortgage market in Dubai, also demonstrates a 34% year-on-year decline between Q1 2008 and Q1 2009. At the end of Q1 2009, property prices in Dubai had returned to approximately the same level as those recorded in Q2 2007.

John Davis, CEO, Colliers International, said, "Negative sentiment is the key factor driving the decline in the Index and the availability of finance continues to impact the market. End-users are concerned about job security and therefore unwilling to enter the market, even if finance is available to them, while the price/yield gap is tempting professional investors to wait for further declines. On a more positive note, the Index remained unchanged in March 2009. However, we would caution that it is too early to say whether the halt in the decline of the Index can be sustained, especially over the traditionally quieter summer months."

Colliers' analysis also highlights a key change in Dubai real estate market as professional investors, focused on the yield generated by a property, became the primary purchaser type as end-users and speculators fell away from the market. The HPI also analyses the trends for prices achieved for completed properties as opposed to properties still under construction.

Dubai Property prices are expected to fall by 70-75%

A recovery in the property market in Dubai is unlikely this year with some analysts predicting further steep falls in real estate prices.

The latest analysis from UBS Bank predicts that house prices in Dubai could plunge by up to 70% from their peak levels in 2008.

Analysts said that the real estate sector in Dubai will face a substantial glut next year while demand will continue to be weak as many of the expatriates who drove the property boom in recent years are losing their jobs and are returning home.

"In our view, we are still in relatively early stages of the property downcycle in UAE, and we believe risk-reward profits are not yet compelling for investors to consider market re-entry, hence, continued price declines are expected," said UBS.

UBS expects the average house price in Dubai drop to about Dh500 per square foot this year, compared to its peak of Dh1,850 in the fourth quarter of 2008. Prices have already fallen by 25% cent to about Dh1,400 per square foot.

It also predicts a further decline in Dubai's expatriate population which will fall by 8% this year and 2% in 2010. "We would not be surprised to find Dubai residential vacancy rates reach between 25% and 30% by the end of 2010," it said in its report.

UBS has also downgraded Emaar Properties, Union Properties and Aldar Properties, saying the UAE's property market fundamentals have weakened in the first quarter of 2009.

It cited existing investors defaulting on payments, insignificant incremental financing for both infrastructure projects and mortgage issuance and an increase in project cancellations

Dubai residential property prices have fallen by up to 42% over the last six months and have further to fall further to fall, according to the latest report Colliers International.

Ian Albert, Colliers' regional director said that speculators had largely quit the Gulf market and debt financing was unavailable, leaving only professional investors who only want nearly complete or income generating property investments.

Tuesday, 7 April 2009

New regulation likely for termination of off-plan contracts in Dubai

The Dubai Land Department has amended the Article 11 of Law No.13 regulating the Interim Real Estate Register, and this will be released in 15 days time. Once, released the new regulation is hoped to introduce provision for cancellation of contracts, and is hoped to benefit the market.

The department had already issued an internal circular during November 2008, wherein the circular stated that in case of termination of an off-plan contract, the developer can retain 30 percent of the contract value (30 to 70 percent of the amount paid), and that this would be applicable to amounts exceeding 30 percent.

However, in case of termination of contract, the developer of the property will retain the amounts paid by the buyer, until the real estate is sold.

The Director-General of Dubai Land Department, Sultan Butti bin Mejren, has said that the revised article would establish new grades for properties and developers, and would be more than the 30-70 rule, currently applicable.

The Law No.13, Article 11, which is currently applicable states that a developer is required to keep the Land Department informed, if a buyer breaches a sales contract. Thereafter the department would notify the purchaser personally or by registered mail or email, giving him one month time to fulfill the contractual obligations. At the end of the term, the developer can cancel the contract and refund the sum paid by the buyer, after deducting an amount not more than 30 percent of the total value of the unit.

Monday, 6 April 2009

Discount for Dubai property? Easy!

New property in Dubai could now be snapped up for huge discounts after agents said some prices have fallen by as much as 70 per cent in 12 months.

Some brokers also believe the correction will continue into this year and will reach a level similar to prices seen in 2005, before a full recovery starts.

Earlier this year many real estate companies began to introduce flexible payment plans, discounts, and revised prices for people who had already put down deposits.

Even some of the plushest property in the emirate has been hit, with brokers claiming in February that some real estate schemes on the man-made Palm Jumeirah island had dropped by 50 per cent.

Quoted by the Khaleej Times, Mohammed Khan of real estate brokers New World Capital said: “We have already seen prices plummet across Dubai’s property sector by 50 to 70 per cent to the level of 2005.

“We expect the plunge to continue for the next six to eight months to bring prices down to their original level five years ago.”

According to the Khaleej Times, Khan mentioned a number of real estate schemes which have seen price drops, including villas at the Garden Homes project at AED 6 million ($1.6 million), down from AED 15 million ($4 million) a year ago.

Also mentioned were falls in property prices at Jumeirah Lake Towers, which were selling at AED 700 ($190) per sq ft of real estate compared to previous levels of AED 1,500 ($407) per sq ft

Dubai property authorities to clarify default rules

A new real estate law amendment is to be introduced in Dubai to clarify what happens when a property buyers defaults on payments.

At present Article 11, Law 13, states that if a buyer defaults on a sales contract the developer can cancel the contract and return the buyer's money minus 30%. But there has been confusion over whether the law applies to 30% of the money paid to date or 30% of the total amount due.

The Dubai Land Department is expected to release an amended Article 11 this month introducing new provisions for the cancellation of contracts. 'We will release an amendment to Article 11 in the coming weeks. It is something good for the market as it is more comprehensive and detailed,' said the department's Director General, Sultan Butti bin Mejren

'The revised article will set new grades for properties and developers. It will be more than the 30-70 rule which is now applicable,' he added.

Meanwhile the Real Estate Regulatory Authority has clarified confusion over its new rental index. A spokesman denied reports that it was not going to be issued in April and confirmed it will be published this month and will reflect falling rent values.

It is expected to include lower rental values to take into account the current slowdown in the property market.

In a statement Mohammed Khalifa bin Hammad, the director of Real Estate Relationship Regulation at Rera, said the index was being updated as a result of data collected through the online rental contract registration programme.