Dubai housing slump nears bottom: Jones Lang LaSalle

(DUBAI) A downturn in Dubai’s residential properties market appeared to be nearing a bottom in the second quarter as the rate of price declines eased and transaction volumes stabilised, a Jones Lang LaSalle researcher said.

Dubai’s once-booming property sector has been hit hard by the global financial crisis, but the pick-up in more mature markets such as the US and Britain, is starting to boost investor confidence.

‘The stabilisation is showing that the market is reaching the bottom and sales activity is starting to come back in,’ Craig Plumb, head of research at Jones Lang LaSalle Middle East and North America told Reuters on Sunday.

‘Prices are reaching a level where people think they are willing to buy,’ said Mr Plumb, adding that sales activity was expected to increase in the next six months. Average asking sale prices fell by about 24 per cent in the second quarter from the first quarter, but the rate of decline slowed, he said in a report published on Sunday. This signalled the gap between asking price and selling price was narrowing, he added.

The decline in average housing prices has slowed down to 6 per cent in the second quarter compared to the previous three months, according to the report. Transaction volumes declines by 13 per cent compared to the first quarter and 58 per cent from their level in the second quarter of 2008. The gap between achieved and asked prices narrowed to 7 per cent in the second quarter of 2009, after achieved prices were 20 per cent lower than asking prices since the second quarter of 2008, it said.

The decline rate in rental prices also slowed, Jones Lang LaSalle said.

The average rent for two bedroom apartments fell by 15 per cent in the second quarter, compared with a 22 per cent decline in the first quarter of this year.

Additionally, new residential supply will continue to enter the market as 22,400 units are expected to be handed over this year, despite the cancellation or delay of more than US$24 billion worth of housing projects, it said. — Reuters

Source: Business Times, 18 Aug 2009

Dubai home prices drop further

(DUBAI) Dubai house prices fell by 24 per cent in the second quarter from the prior quarter but the pace of decline slowed, in line with improving global property markets, Landmark Advisory said on Sunday.

Prices fell less in the same period in Abu Dhabi, as the United Arab Emirates’ (UAE) capital, home to most of the country’s oil, continues to weather the global downturn better than its neighbour.

The average sale price for villas in Dubai fell 24 per cent while apartments declined 17 per cent, Landmark said.

Prices for villas and apartments fell 32 per cent and 23 per cent respectively in the first quarter from the fourth quarter, the firm said in its May report.

Dubai’s once-booming real estate sector has been hit hard by the global financial crisis, but the pick-up in more mature markets such as the United States and Britain is starting to cheer investors.
Prices in the US rose in May for the first time in three years while prices in Britain gained for a third month running in July.

House prices in Dubai are likely to stabilise by the fourth quarter, after falling 9 per cent in the second quarter from the previous quarter, Colliers International said last week.

Rents for villas in Dubai fell 19 per cent to 220,350 dirhams (S$86,480) in the second quarter, while apartment rents dropped 23 per cent to 129,900 dirhams, Landmark said.

Transaction volumes rose 25 per cent and 20 per cent respectively as more people relocated to Dubai from the neighbouring emirates of Abu Dhabi and Sharjah, it said.

In Abu Dhabi, sale prices fell by up to 11 per cent for apartments in the second quarter and 8 per cent for villas compared with the previous quarter, but prices are unlikely to suffer further significant declines, the report said.

The rate of decline also slowed as prices for both categories fell 20 per cent and 30 per cent respectively in the first quarter from the fourth quarter, Landmark said in May.

Rents for both apartments and villas fell by roughly 10 per cent in the second quarter, it said, adding average rents would likely fall significantly as more supply enters the market.

Seven emirates make up the UAE federation.

Landmark Advisory is part of real estate brokerage and consultancy Landmark Properties, which has offices in the UAE and London. — Reuters

Source: Business Times, 11 Aug 2009

Property rents in Dubai seen falling less

(Dubai) RENTS for residential and commercial properties in Dubai will fall for the rest of this year, but declines will be marginal compared with the first half of the year, CB Richard Ellis said on Thursday.

The Gulf emirate’s once-booming property sector has suffered sharply as a result of the global financial crisis, as prices fall, developers slow or cancel projects and jobs are cut.

‘A period of minimal negative growth over the next 3-6 months could see some stability achieved and the market bottom called before year-end,’ said Matt Green, associate director, Research & Consultancy at the real estate services firm.

Rents in Dubai are seen declining by 40 per cent for the whole of this year, and a further 10 per cent in 2010, before recovering in 2011, a Reuters poll showed in June.

Expats leaving Dubai, coupled with an increase in property supply, has led to a sharp drop in apartment prices.

Newer residential areas have been the worst affected with rents for one-bedroom apartments falling as much as 40 per cent year-on-year to 60,000 dirhams (S$23,608), the report said.

Office supply will increase substantially over the next six months with many projects in the latter stages of completion, it said.

Several projects expected to enter the market in the first half of the year are being pushed back further, while slowdown in business activity has led to a slump in demand for office space.

In neighbouring Abu Dhabi, weak demand and low levels of sales activity are expected to shape the market in the second half of the year, the report said.

The property sector of the United Arab Emirates’ capital, home to most of the country’s oil, has been more resilient than Dubai to the global economic downturn.

Sales prices declines are likely to level off as more investors choose to hold property due to low prices while rents are expected to fall further as more supply enters the market.

‘Distressed sales are starting to clear with more investors choosing to hold on to units.’

Prime office rents in Abu Dhabi have fallen as much as 40 per cent to as low as 3,000 dirhams per square metre over the last three quarters, the report said.

‘Despite comparatively sound macro fundamentals, slowdown in rents is inevitable as demand weakened markedly. The outlook remains uncertain.’ — Reuters

Source: Business Times, 1 Aug 2009

Dubai house prices to fall another 20%

Half of the UAE’s construction projects put on hold

(DUBAI) Dubai house prices will fall another 20 per cent this year, as the former boomtown continues to suffer a sharp economic downturn, a Reuters poll showed.

Residential real estate prices in Dubai – home to man-made islands in the shape of palm trees and the world’s tallest building – have a less than 20 per cent chance of picking up before 2011, according to the median forecast of 10 analysts at banks, investment firms and research institutions.

Three of 10 forecasters said that they expected prices to hit a bottom in the second half of 2009 and three predicted that it would happen in the first half of 2010. One forecaster said that prices would rise by 10 per cent from now in 2010.

Five analysts expected prices to fall a further 20 per cent or more this year, and prices could fall an additional 15 per cent next year before stabilising in 2011, the poll showed.

‘We may see a further drop in prices as the magnitude of the problem in the sector is still high and the recovery of the sector may take some more time,’ said Sajeer Babu, an equity analyst at National Bank of Abu Dhabi, which participated in the June 2-9 poll.

Property prices in the seaside emirate have slumped since late last year, when the global financial crisis and a drop in oil prices ended an economic boom in the Gulf Arab region.

Hundreds of billions of dollars of projects have been cancelled in the United Arab Emirates, Dubai firms have laid off thousands of employees and UAE banks have been loathe to extend new mortgage loans.

More than half of the construction projects in the UAE, worth US$582 billion, have been put on hold, Dubai-based market research firm Proleads said in February.

Rents in Dubai are seen declining by 40 per cent for the full year 2009 and a further 10 per cent in 2010 before recovering in 2011, the poll showed.

While it indicated that house prices for 2009 will fall an average of 50 per cent from a peak in the third quarter, it is likely that prices for off-plan properties, or properties still under construction, will fall in excess of that.

Liquidity problems, job losses and additional supply to the market are expected to delay the recovery in Dubai’s property sector.

‘We believe a recovery is likely in late 2010 or early 2011, with this based on a series of factors which include a decline in demand for buying property,’ said Sana Kapadia, vice-president of equity research at EFG-Hermes in Dubai.

‘Our house view is that lower or potentially negative population growth is likely to put a strain on demand,’ she said, adding that more clarity regarding the legal framework for property ownership and greater confidence were also needed.

Dubai’s population is set to fall 17 per cent this year, the bank said in a report in March.

In a previous Reuters poll in March, Shuaa Capital said that it expected 80,000 units of supply for the next two years.

Dubai property prices had soared sharply after the emirate opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments.

From the beginning of 2007 to mid-2008, property prices jumped almost 80 per cent, according to Morgan Stanley estimates.

As buying properties became more expensive, Dubai’s mainly expatriate population opted to rent instead, causing prices to spiral upwards.

Three of the analysts said that rents in Dubai could fall as much as 50 per cent during 2009.

Meanwhile, Abu Dhabi, the UAE capital and home to most of the country’s oil, has fared better during the global economic downturn.

House prices there are expected to fall 25 per cent on average for the full year, with two out of eight analysts saying that prices would slump as much as 45 per cent.

Prices would remain flat in 2010 and pick up in 2011, the poll showed. — Reuters

Source: Business Times, 16 June 2009

Gulf builds hotels worth US$140b amid crisis: study

Just 19% of 893 projects surveyed have been cancelled or suspended

(DUBAI) Gulf Arab countries have more than US$140 billion worth of hotel projects under construction, with just 19 per cent being suspended or cancelled as the industry faces a global slowdown, a survey showed on Sunday.

Of 893 hotel projects surveyed in the Gulf, 5 per cent had been cancelled, 14 per cent put on hold, and 42 per cent were under execution, showed the survey by research house Preloads Global. The rest were under study, planning, bidding, design, or had been completed.

The Gulf Arab region had 306 new hotels, with 108,600 rooms under development, and cash flow is expected to recover in most of the region next year after falling this year, it said.

The United Arab Emirates (UAE), which includes Dubai and Abu Dhabi, hosted 62 per cent of the projects. The country saw the cancellation of almost 5,000 planned rooms during the month of May, and 6,500 since the beginning of this year.

Dubai, the Gulf’s trade and tourism hub, faces a sharp slowdown in its property sector, with real estate prices tumbling 41 per cent in the first three months of 2009, according to property consultant Colliers. The slowdown has led to project cancellations worth billions of dollars.

Active cash flow, or money available for project construction, in the Gulf is estimated at US$30.4 billion for 2009, and is projected to increase to US$31.6 billion in 2010, the survey showed. But cash flow in the UAE is expected to fall to US$18.4 billion in 2010, from US$19.9 billion in 2009.

The economic downturn had impacted the region’s cash flow negatively, said the survey, resulting in ‘much more cash flowing out of the hotel construction sector than into it’.

This has led to a fall in cash flow in 2009, compared with 2008, it said, without giving a figure for last year. A recovery is expected by late 2010, and more cash flowing into the industry than out of it by 2011.

Hotel occupancy levels have remained relatively stable throughout the Gulf since 2003, but the economic slowdown has had a negative impact and 2009 is expected to be a ‘challenging’ period for the hotel industry, the study said.

UAE hotel occupancy levels are expected to drop to 61 per cent in 2009 from 79 per cent in 2008, while the rest of the Gulf could see 45 per cent to 55 per cent occupancy levels in 2009. A pick-up in occupancy levels, to 2008 levels, will occur by the end of 2010, followed by accelerated ‘real growth’ by 2013.

‘Given projected increases in demand from 2013 onwards, more hotels will be required if relatively high occupancy levels are to be maintained,’ Emil Rademeyer, director of Preloads, told reporters. ‘With an average completion period of two to three years, 108,600 rooms should come online by 2011.’

The region will need to increase its construction activity starting in 2010 in order to satisfy the projected growth in demand to follow, the paper said, especially with the area’s population and visitors expected to grow. Visitors to the Gulf region are expected to reach just below 40 million in 2010, Mr Rademeyer told Reuters by telephone. — Reuters

Source: Business Times, 26 May 2009

UAE grants multi-entry visas to foreign homeowners

(DUBAI) The United Arab Emirates (UAE) said it would grant expatriate homeowners multiple-entry visit visas enabling them to stay six months at a time if they own properties worth at least one million dirhams (S$402,061).

Property buyers had been waiting for legislation for years to clarify their residency rights in the second-largest Arab economy after many of the country’s seven emirates allowed foreign investment in property in recent years.

Still, analysts said the government decree, issued on Saturday, needed more details on which properties would be eligible amid a real estate downturn that dragged Dubai property prices down 41 per cent in the first quarter.

‘Greater clarity regarding visa and ownership rights of property owners would help to increase transparency and hence confidence in the market, perhaps providing a positive trigger for demand,’ EFG-Hermes said in a research note.

Some developers in Dubai – home to the world’s tallest tower and man-made islands shaped as palm fronds – had been offering foreign property buyers promises of residency visas if they bought properties.

But, according to a decree issued by UAE Minister of Interior Sheikh Saif bin Zayed al-Nahayan, ‘owners of built-up properties can stay for six months from the date of entry into the country.’

After six months, owners would have to leave the country and would be granted re-entry only if they meet certain conditions, including that their property be wholly owned, built, worth least one million dirhams and fit for accommodation by a family.

The owner should also have a fixed income of no less than 10,000 dirhams a month, or the equivalent in a foreign currency.

The visit visa does not give the owner the right to work in the UAE, the decree said.

The UAE, the world’s third-largest oil exporter, is a federation of seven emirates including Abu Dhabi and Dubai, each of which has adopted separate rules regarding foreign ownership of real estate.

‘More clarity is needed,’ said Sana Kapadia, vice-president, equity research at EFG-Hermes in Dubai. ‘It depends whether it means one million dirhams at the time of purchase or if it is the current selling price.’

Real estate prices in Dubai, for instance, have tumbled 41 per cent in the first three months of 2009, according to property consultants Colliers.

Home prices rallied during a six-year boom spurred by Dubai’s decision in 2002 to allow
foreigners to invest in some properties on a freehold basis.

Now, many units are now selling for less than one million dirhams, according to real estate brokers.
‘You’ll find an apartment in Discovery Gardens, International City and Jumeirah Lake Towers for less,’ said Vincent Easton, an independent property analyst.

Prices are even lower in smaller emirates such as Ajman and Ras al-Khaimah, he said, adding that the one million dirham benchmark could refer to a country-wide average price. — Reuters

Source: Business Times, 5 May 2009

Dubai developer posts 87% fall in Q1 profit

Union Properties nets 30m dirhams as sales fall, projects get delayed

(DUBAI) Union Properties PJSC, the Dubai-based developer that suspended work on a Formula One-themed park, said that first-quarter profit plunged 87 per cent as the global financial crisis hurt real-estate sales and caused projects to be delayed.

Net income fell to 30 million dirhams (S$12 million), or one fil a share, from 238 million dirhams, or 7.8 fils, a year earlier, the company said in a statement yesterday. Sales dropped 40 per cent to 572 million dirhams.

The worst financial crisis since the 1930s has weakened the property market in Persian Gulf states as banks curtailed mortgage lending and speculators sold assets.

Union Properties was hurt by lower revenue at its largest business segment, contracting to build projects for other developers, it said.

Union Properties declined two fils, or 2.7 per cent, to 73 fils at 1.02pm in Dubai trading. The shares have gained 12 per cent this year, while the six-member Dubai Financial Market Real Estate Index has risen 4.6 per cent.

‘The drop today isn’t severe, which suggests the market is bottoming out,’ said Samer Al-Jaouni, general manager at Middle East Financial Brokerage Co in Dubai, referring to Union Properties stock.

Emaar Properties PJSC, the largest developer in the United Arab Emirates, last week said that first-quarter profit dropped 74 per cent as the liquidity crunch and falling house prices cut off growth in Dubai’s real estate market.

Emaar is reducing costs and delaying projects after demand fell in Dubai.

Dubai house prices may slump as much as 70 per cent from their peak late last year as demand drops and banks fail to resume mortgage lending, prompting mergers, UBS AG said in a report on April 22.

Union Properties suspended its planned Dubai Formula One theme park because of the financial crisis, it said on Feb 26.

The company had 6.2 billion dirhams in bank debt at the end of the quarter, giving it a debt-to-equity ratio of 34 to 66, according to yesterday’s statement. Union Properties agreed to refinance 1.1 billion dirhams of short-term debt this quarter.

The company started handing over properties in the MotorCity development at the start of the current quarter and will book revenue as the properties are delivered to clients. — Bloomberg

Source: Business Times, 5 May 2009