Dubai''s property market is showing signs of recovery, with property prices rebounding by 9 per cent since hitting bottom in April, but low occupancy levels could pull down sales and rent prices before the end of the year, two separate reports said on Monday.
Brokerage HC Securities said the property market in the emirate appears to be headed for a turnaround, thanks to improving sentiment and credit returning to the market.
It said mortgage values and volumes have steadily recovered to pre-crisis levels, reaching 24 per cent and 14 per cent in October, respectively, compared to seven per cent and six per cent in April. Mortgages in freehold areas increased to Dh340 million in October, from a low of Dh190 million in April, said HC Securities.
"Liquidity returning to the system appears to be the driver of renewed interest. Mortgage providers have more recently raised their loan-to-value ratios, relaxed their credit norms, and have lowered their rates in line with a downward trending in Emirates interbank offered rate," said HC Securities in a report.
HC Securities said however that, property prices in Dubai, which already declined by 30 per cent from peak to trough, could see a bigger decline of 40 to 60 per cent, and no recovery prior to 2010 or 2010. This is due it said, to the fleeing of expatriates, as well as stock additions coming on stream.
Rents on the other hand, declined by 38 per cent since January, but the pace of decline is slowing, with only a two per cent drop in September and October, as weakened demand in Dubai, is being offset by a major spillover of people from other emirates like Abu Dhabi, Sharjah and Ajman.
In a separate report, property consulting company CB Richard Ellis said that in terms of rents and sale rates, the bottom is nearing, but it also expects a further nominal decline before the year ends. It said rate declines in 2010 will become more project specific, with areas of significant oversupply to suffer the most.
In the office market, CB Richard Ellis said the downward pressure on lease rates continued in the third quarter as demand for office space remained low. It said the situation was aggravated further by considerable new supply coming on top of an increasingly available existing stock.
There was also a strong pressure on the residential market, which like the office market, is suffering from oversupply and intense competition. In many developments, resales are at 2006 rates, a stark reminder of the extent of the market downturn in the space of just one year, the CBRE report said. "The short-term outlook for both residential and commercial properties across Dubai is likely to remain slow-moving. We anticipate a continuation of rising vacancy ratios. As rental and sales rates drop in the residential sector, we foresee continued inward migration from neighbouring emirates, and increasing pressure to negotiate both sale and lease terms." (Khaleej Times)