Property prices to peak in 2008

20/12/2007

Dubai's property prices look set to rise between 5% and 10% on the coming year that's according to a new report. It is said that, delays in housing projects means controlled demand will remain unfinished. The prices will peak in the 2nd half of 2008 when the market faces its biggest deficit.

As from the EFG Hermes reports spread a better picture for house hunters in 2009 when supply believes to swing to the buyer's favor. Investment bank expects 64,000 units will be available in 2008 and 68,000 in 2009.

In October real estate developer Tamweel estimated that the present gap in supply to be about 20,000 units.

"We expect prices will begin declining in 2009 once supply peaks, with a cumulative decline of 15 per cent to 20 per cent between 2009 and 2011," EFG Hermes said.

Prices for both villas and apartments rose 18.7 per cent in the first 11 months of 2007, above expectations.

The EFG Hermes report argues that the current weakness of the dirham is boosting the attractiveness of the local real estate market. However it expressed fears that the declining confidence in the real estate sector, particularly in the US and the UK, could begin to affect the UAE.

"This adds an element of uncertainty to our demand forecast, since it could potentially cause property prices to decline sooner than expected," the report noted.

The report also highlighted problems in the commercial sector, which has seen rents rise by 40 per cent in Dubai.

"Dubai is one of the most expensive business cities globally, with an average rent of $98 per square foot, almost as high as New York. This compares to $106 in Hong Kong, $127 in Paris, and $189 in Mumbai or $68 in Abu Dhabi," EFG noted

The report estimates commercial occupancy rates of around 99 per cent in both old and newly-developed areas of Dubai.

 

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