“UAE property prices have fallen off a cliff”

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UAE Property – Chill winds rapidly changing landscape

In it’s latest report Morgan Stanley summarized what the firm considers are the most important developments in the UAE property market, with highlights on what is expected from Emaar’s 4Q08 numbers and likely operational performance over the next 2-3 years.

UAE property prices have fallen off a cliff

As it was expected, property prices in the region have come down across the board since their peak in September 2008, albeit at a much faster rate due to the global financial crisis. According to Morgan  Stanley proprietary property price index, asking prices in Dubai have fallen by an average of 25% and 20% in Abu Dhabi since their peak in September 08 (see facing Exhibits). Moreover, anecdotal evidence suggests sharp falls in transaction volumes in 4Q due to deteriorating economic conditions, the disappearance of speculative buying and the lack of financing.

Signs of Dubai rental market weakening, but not yet Abu Dhabi:

Rental rates started to ease in Dubai in December 08, where average rents have fallen by 7% on average since their peak last summer. This is explained by the growing supply of new properties coupled with decelerating demand and reduced affordability. Abu Dhabi seems more resilient so far, given its different demand/supply fundamentals.

Project delays and new launches halted:

Property developers have started to announce project delays in response to falling demand and deteriorating market conditions. According to Zawya, US$263 billion worth of projects in the UAE have been delayed/cancelled, with all the recently announced mega projects, including Meraas Jumeirah Gardens (US$98bn) and Nakheel’s Harbour project (US$38bn), put on hold.

Emaar 4Q08 results:

The market may have already factored in a sharp fall in the group’s 4Q08 numbers, but there are a number of pertinent questions that need to be answered by management, in our view. In particular, given the challenging operating environment, an update on its future strategy is particularly pressing, we think.

2 COMMENTS

  1. Its good that the rental market is going down. It will help to fill in empty properties. Bring inflation down and attract people to look for jobs in UAE.

    All developers who have not broken ground as yet should cancell their projects and refund the instalments to the buyer. Without interest and in instalments.

    All developers who have broken groiund and whose projects have been delayed should also extend the date of instalments accordingly.

    Buyers have to also be protected at all costs not only developers. Otherwise future investors (not speculators).will loose confidence in the property market that will be a “death knell” for realestate sector in UAE.

    The punch line here is “Bring in a law to Protect the buyer”. The developers are protected by the law already.

  2. Hi & thanks for your comments!

    We all wish for the same, however, it’s a little too late….we just have to accept the losses as we can and learn from our mistakes.

    Time can only heal the wounded confidence and the financial situation of the most expats….

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