Last Updated: Sun Jan 09, 2011 16:04 pm (KSA) 13:04 pm (GMT)

Dubai property prices are expected to take another dip

Nakheel, arm of state-owned conglomerate Dubai World, resumed part of its real-estate projects in 2010
Nakheel, arm of state-owned conglomerate Dubai World, resumed part of its real-estate projects in 2010

Dubai property prices are expected to dwindle further more after its decline by 5.1 percent in 2010 fourth quarter.

As supply continues to increase, drops in values will be unavoidable, said Cluttons LLP, an esteemed London-based property broker.

Cluttons expects 35,000 homes to be completed in Dubai within the next two years.

Property more affordable

The flight to quality in both the sales and rental markets as more desirable locations are becoming increasingly affordable will drive the values of the properties down, the broker said.

"The credit crisis squeezed speculators out of the market and forced banks to lend less" said Ahmed Badr, an analyst at Credit Suisse Group AG.

Most homebuyers in Dubai have budgets less than $410,000 (1.5 million Dirhams) and only about 6 percent of them would even consider properties exceeding that amount, Cluttons added.

Office rents down

Office rents also fell in the fourth quarter as new buildings added to the amount of empty space.

In comparison to the international market, only Shanghai and Moscow had more office space under construction in June 2010 with 2.6 million square meters being built in Dubai, Colliers International said in a report in October.

Owners of office space in Dubai are becoming increasingly flexible, offering incentives to attract tenants, Cluttons said.

The new flexible arrangements according to Cluttons include reduced rents and regular payment terms as well as rent-free periods and longer leases.

“Some landlords are even offering to pay brokers on behalf of tenants.”

Villa prices dropped 5.1 percent, while apartment values declined 2.4 percent in the fourth quarter from the third.

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