Property prices in Dubai could fall another 30 % from current levels and up to 150,000 homes could be lying empty by the end of 2011, according to analysts.
With prices in some locations down by up to 50%, the latest forecast from UBS is a blow to the emirate’s property market. It also comes as it has been reported that one of Dubai’s iconic developments, Palm Jumeirah, has seen its first re-possession.
‘We reiterate our view that by end of 2011 Dubai property oversupply on residential and commercial properties may reach roughly 40 to 50% and house prices may decline another 30% from current levels,’ said analyst Saud Masud.
‘We estimate total Dubai housing supply by the end of 2011 to be roughly 360,000 with oversupply potentially at 150,000 residential units,’ he added.
Masud also said property investors in the UAE may find prices to be 40% cheaper in the auction market as higher default risks lead to more bank repossessions.
Indeed reports that an apartment on Palm Jumeirah, the man made islands that became a symbol of Dubai’s real estate market, was sold by the bank for AED745 per sq ft, some 35% less than the current market rate, has stunned the industry.
The three bedroom apartment in Al Shala, on the prestigious development, was taken back by the owner’s bank last week after he failed to resolve Dhs1.7 million of outstanding debt having left the country. What has been astonishing is how quickly the bank moved to shift the property.
According to some the fact that UK based Barclays has already won a number of repossession orders on properties in Dubai has set a precedent and now banks won’t hesitate to follow suit. The locations of the Barclays repossessions have not been made public.
Banks will now be more aggressive in pursuing legal action, according to Antoine Yacoub, a banking analyst at Moody’s Investors Service. ‘They were trying to avoid the courts and restructure most of their loans, but once they see a precedent has been set, they will be encouraged to push more cases through,’ Yacoub added.