The outlook for Dubai’s property market is not expected to improve any time soon, according to a gloomy prediction from ratings agency Moody’s, who think a price recovery will not begin until 2016.
Dubai first opened its doors to overseas investors in 2002, granting them freehold ownership rights at a number of developments, and this heralded the start of a property boom which lasted until the middle of 2008, and which saw prices increase by nearly 80%. However when the boom came to an end, prices fell by up to 60%, and the real estate market is still facing problems due to oversupply. Experts don’t expect any new construction or major new projects to begin at least in the short term, but the Reuters report still estimates prices will fall by another 10% before beginning to stabilize. Some analysts think it could be 2020 before prices return to 2008 levels while others take a less pessimistic view but still believe it will be several years before supply and demand reached equilibrium.
The situation isn’t much better in Abu Dhabi, the capital of the United Arab Emirates, as around 11,000 new homes are expected to come onto the market before the end of the year, adding to the current oversupply. This is expected to force prices downwards by another 14%, which would mean a total fall of 60% from peak values, while rents are also expected to drop by 14% in 2011, and by 10% in 2012.
Although the residential property market in Dubai isn’t faring too well, at least the emirate has benefited from the Arab spring as it has been seen as a safe haven by travellers in the region during the summer months, resulting in an upswing in mall traffic.