Dubai Property Prices (Aug 2010 Update) - Still going down

-Dubai property prices fell 4% during the second quarter of 2010, compared with the first three months of the year, the first quarter-on-quarter contraction in 12 months, U.K.-based real-estate consultancy Colliers International said Sunday.
Despite the second quarter slide, Colliers said its quarterly price index showed a 7% increase in overall house price values compared with the second quarter of 2009.
The average price of property slipped to 1,014 U.A.E. dirhams ($276) per square foot in the second quarter of 2010, compared with AED1,061 in the first quarter, Colliers said in an emailed statement.
The real-estate consultancy warned that forthcoming housing supply and declining rental incomes are likely to put downward pressure on Dubai house prices moving forward.
"We anticipate a further slowdown and we have an ongoing concern of the new supply entering the market, which will further impede recovery," said Ian Albert, regional director at Colliers International.
Dubai's property market has been hit hard by the global financial crisis and prices have slumped close to 50% since their peak in 2008 while many of the emirate's most ambitious projects are on hold.
Colliers said it expects around 33,000 units to be released onto the Dubai market by the end of 2010, down from its earlier estimate of 41,000 following project delays or rescheduling. However, given Dubai's history so far, a large number of these units may not be delivered on time and may cross over into 2011, it added.
"There are already more than 340,000 residential properties in Dubai with an average occupancy rate of 87%, with further declines anticipated. The market simply cannot absorb the additional supply unless the population grows and/or the release of stock is slowed down," said Collier's Albert.
Compounding the situation are dwindling rents in the emirate with Dubai's overbuilt residential market contributing to more than a 50% decline in average rental rates since 2008, discouraging ownership and further dampening demand, said Colliers.

Rents for commercial properties in Dubai continue to soar

As per reports, Dubai continued to witness huge demand for office space last year, with the emirate reflecting one of the highest global rental yields for commercial premises, ranging 17 to 18 percent.

Asteco, in its quarterly market research, reported that there was a huge increase in capital values, particularly, in locations where the new buildings were nearing completion.

The rents for office space grew by five percent on an average in comparison to the last quarter. The highest rent rates were noticed in Oud Metha and Sheikh Zayed Road, with 6 and 12 percent respectively, as per the fourth quarter report of Asteco.

When compared to the rates during the corresponding period in 2006, the office rents in Dubai last year saw a considerable increase of 44 percent, and the occupancy rates continued to touch 97 to 99 percent, the report revealed.

The Director at the Research Valuation and Consultancy at Asteco, John Allen, says "The increase in prices indicate the fact that the commercial sector of Dubai does not have a liquid secondary market at present. The limited delivery of new office premises over the last couple of years has brought about an undersupply in the market, resulting in strong surge in office rents and sales prices."

Asteco anticipates that the commercial units would witness another surge in prices, as the buildings near completion next year. However, according to Asteco, a shortfall in supply of of nearly 18million square feet of office space would be experienced next year due to delay in construction.

"We expect that landlords would get more competitive with increase in supply. More high quality finishes that are being offered, will be tailor-made to suit the requirement of tenants, and most important, the rents will stabilize reflecting true market values," Allen said.

A new factor that will have a major impact in the commercial property market during this year, will be, the implementation of the new 'green rules', which would become effective this year.