Home prices in Dubai, the property market that had the biggest reversal because of the financial crisis, fell as much as 5.1 percent in the fourth quarter from the previous three months and more declines are “unavoidable,” Cluttons LLP said.
Cluttons, a London-based property broker, said villa prices dropped 5.1 percent, while apartment values declined 2.4 percent in the fourth quarter from the third. The broker expects 35,000 homes to be completed in Dubai over the next two years. Property prices in the emirate slid by almost 60 percent from their peak in mid-2008 after the credit crisis squeezed speculators out of the market and forced banks to lend less, Ahmed Badr, analyst at Credit Suisse Group AG said today.
“As supply continues to increase, drops in values will be unavoidable,” Cluttons said. “We are continuing to see the flight to quality in both the sales and rental markets as the more desirable locations become increasingly affordable.”
Most homebuyers have budgets of no more than 1.5 million dirhams ($410,000) and only about 6 percent of them would consider properties costing more than that, the broker said. Rents of apartments fell 3.3 percent in the fourth quarter, while villa rents declined 3.2 percent from the previous quarter, Cluttons said.
Buyers and tenants are focusing on completed projects with amenities and transport links such as The Old Town, Dubai Marina and The Greens, Cluttons said. That has led to a two-tiered market with inferior-quality homes, poor maintenance contracts and lack of views or amenities are proving hard to rent out.
Building Spree: Office rents fell in the fourth quarter as new buildings added to the amount of empty space. Dubai had 2.6 million square meters (28 million square feet) of offices under construction in June, the third-highest amount after Shanghai and Moscow, Colliers International said in a report in October.
Owners of office space in Dubai are becoming increasingly flexible, offering incentives to attract tenants. They 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, Cluttons said.
“These are positive changes in the marketplace, which are demonstrating to potential tenants that landlords understand the need to be proactive and flexible in structuring lease terms,” the company said.(C) Bloomberg
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