The latest report by HSBC stated that Dubai property prices fell 23% last month from their record high in September. Prices for Dubai villas fell 30%, while the price tags for Dubai apartments were 20% lower than their September peak, reported Reuters.
HSBC Holdings Plc slashed its price estimate for property giant Emaar Properties (EMAAR) to Dh8.5 from Dh13.9 amid plummeting real estate prices.
The property sector in Dubai, the emirateâ€™s major growth driver, has seen a surge in the last five years but has been hit hard by the global financial crisis, forcing developers to scale many projects as liquidity dried up.
The bank expects the occupancy of Emaarâ€™s retail and commercial buildings to drop 50 from 60 per cent in 2009 and 60 per cent from 70 per cent in 2010. For Emaarâ€™s hotel business, occupancy is seen scaling back to 50 per cent in 2009 and 60 per cent in 2010, from 75 per cent in both years.
The current oversupply also has negative implications on future sales and could force Emaar to abandon some projects, said HSBC.
The upside is that â€œany decision to slow down on its projects limits the need to reinvent cash flow in the near term and serves to strengthen the balance sheet (of Emaar).â€
HSBC said that Emaar has also responded well to the property crisis by adjusting its strategy and shifting its focus from high-end developments to more affordable mid-income housing.
Moreover, while property prices fell in the fourth quarter, the market continues to clear stock, with volumes in the first two weeks of January going up 6 per cent from the previous month which â€œsignals a return of confidence and liquidity to the property sector.â€
Emaar shares on Wednesday ended 9.75 per cent down to Dh1.85.