Thursday, 20 May 2010

Dubai Prime Property Values Approach Floor, BofA Says

By Camilla Hall

May 17 (Bloomberg) -- Property prices in centrally located areas in Dubai may be reaching a “floor” after values dropped by 45 percent, Bank of America Merrill Lynch said.

“We see an emerging floor for prime assets, particularly in the retail sector, which has the smallest supply pipeline,” Dubai-based analysts including Karthik Sankaran and Abdelrali El Jattari wrote in a note to investors today. Growth in retail, trade and tourism should resume, helping the real-estate industry, the analysts said.

Dubai property projects stalled after the global credit crisis pushed up the cost of financing, prices plummeted and buyers defaulted on payments. The market’s collapse followed a construction boom that created thousands of homes just as demand began to evaporate. Average residential prices across the emirate may fall a further 15 percent this year, according to the bank.

Abu Dhabi-based Aldar Properties PJSC is the Bank of Americai Merrill Lynch’s “preferred developer” because “substantial negativity is priced in.” The analysts reinstated coverage of Emaar Properties PJSC, which opened the largest skyscraper this year in Dubai, giving the company a “neutral rating” and a 12-month share price target of 4.4 dirhams. Emaar closed at 3.75 dirhams yesterday and Aldar at 3.77 dirhams.

Migration within the United Arab Emirates will support established residential locations, though that isn’t a “panacea,” the analysts said. Dubai would have 44,000 vacancies this year “even if all qualifying expats from Abu Dhabi and Sharjah relocated to Dubai tomorrow.”

The completion of a “significant” number of new homes in Dubai later this year will put pressure on prices after they rose 2 percent in the first quarter, Colliers International said in a May 9 report.

Nakheel PJSC, the Dubai World-owned property company seeking to restructure $10.5 billion of debt, restarted work on projects that have been put on hold, Al Bayan reported today, citing people it did not identify.

Friday, 14 May 2010

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Dubai Houses Prices - May Update

May 9 (Bloomberg) -- The completion of a “significant” number of new homes in Dubai later year will further pressure prices that rose 2 percent in the first quarter, Colliers International said.

Colliers, a global real-estate-services firm, estimates that 41,000 residential units will enter the market by the end of 2010, mostly in the low- to mid-income segments. House prices in the first quarter were on par with 2007 levels, rising on average to 1,061 dirhams ($289) a square foot from 1,037 dirhams a year earlier, Colliers said in an e-mailed report today.

“There will be significant oversupply in the market by the end of the year, so it is anticipated the index will experience fluctuations in value going forward,” Colliers’ regional Director Ian Albert said in the report. “Demand is not expected to match the growth in supply, creating downward pressure on property prices,” according to the document.

Dubai’s property prices have slumped more than 50 percent since their peak in mid-2008 as the financial crisis forced companies to dismiss workers. The market’s collapse followed a construction boom that created thousands of homes just as demand began to evaporate.

Apartment prices in the emirate gained 6 percent in the first quarter compared with the previous three months and villa prices rose 2 percent while the cost of townhouses was down 4 percent, Colliers’ house-price index showed.

Banks ‘Selective’

“Numerous” banks and mortgage providers increased the loan-to-value ratio to between 75 percent and 90 percent in the first quarter, according to Colliers. Some also lowered interest rates on mortgages to between 6.5 percent and 8.5 percent.

“Banks remain selective in offering finance, providing it against specific projects, mainly completed or near completion, and only to borrowers who can meet the strict lending criteria adopted by most banks,” Colliers said in the report.

The change of demand from speculative investors to end- users places more importance on the “liveability” aspect and there will be better demand and greater stability for projects that offer a “community lifestyle,” according to the report.