Dubai house prices likely to fall further 20 percent

Dubai residential prices are likely to fall a further 20 percent before hitting a bottom as supply outstrips demand, while prices in Abu Dhabi are seen falling by up to 15 percent in 2009, EFG-Hermes said.
Dubais once-booming property sector, which boasts an indoor ski slope and the worlds tallest building, has ground to a halt as a result of the global financial crisis, as developers slow or cancel projects and thousands of jobs are slashed.
Prices in the seaside emirate have fallen 34 percent on average from their peaks in 2008 but should stabilise during the first half of 2010 and may rise in the second half of 2010 or early 2011, the Egyptian investment bank said in a research note.
"We expect almost no demand in 2009 and 2010 as we forecast the population of Dubai to decline around 17 percent in 2009 to 1.49 million from an estimated 1.79 million in 2008," the bank said.
"Minimal new immigration is expected, especially due to the sharp contraction in the real estate and financial services sector." A Reuters poll earlier this month showed Dubai house prices are likely to slump nearly 38 percent on average this year and are unlikely to recover before 2011.
Structural improvement of the legal framework, increased transaction security and better transparency are needed to restore investor confidence in Dubais property sector, the bank said. "Negative sentiment will continue to put a drag on the sector until ambiguity on ownership rights, foreclosures, strata ownership and other matters is dispelled."
Rents are seen declining at least 20-50 percent from their peaks depending on the location, due to the acceleration of professional expatriates leaving Dubai, and more supply hitting the market, it said. Rents have eased 9 percent so far in 2009.
Around 28,000 units will be delivered in 2009, versus 33,000 delivered in 2008, while 29,000 units are expected in 2010 and an average 22,000 units between 2011 and 2015, the bank added. Transacted prices in the United Arab Emirates capital have fallen 30 percent since 2008 peaks and are expected to drop a further 10-15 percent in 2009.