Jan. 9 (Bloomberg) -- 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.
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.
Dubai property prices decline steadily, as predicted
As predicted in my previous posts and by previous reports, Dubai property prices are still collapsing, and the rate of the collapse is increasing. Note that the declines mentioned here are from the previous quarter, not from the previous year (which is the normal way of reporting).