Dubai home prices to drop further

DUBAI: Dubai house prices, already nearly 60% off their peak, are set to drop another 10% over the next two years as new units are released onto a market awash with supply, a Reuters poll shows.

A property boom in Dubai collapsed at the end of 2008 when it was hit by the global financial crisis and the Gulf state's debt crisis.

Residential property prices in the Gulf state, home to the world's tallest building which has 900 residences, have plunged 58% from their peak in the fourth quarter of 2008, according to the median estimate of 15 banks, investment firms and research institutions.

Prices in Dubai and Abu Dhabi will fall 5% and 10% respectively this year, according to the poll, which was taken over the past week.

The decline will continue in 2012 with prices in Dubai falling 4% and in Abu Dhabi by 5%, according to median forecasts.

Abu Dhabi, the United Arab Emirates' capital and home to most of its oil, weathered the financial crisis better than Dubai but now faces an oversupply of property. Prices have already fallen 45%.

"In Abu Dhabi, we expect transactional activity to increase as stock is handed over on Reem Island. However, the market being relatively small and, in our opinion, the stock exceeding the potential buyers, prices will drop further," Asteco Property Management analysts said.

In the latest sign the property market is struggling, the Abu Dhabi government has stepped in with a US$5.2 billion aid package to the state's largest developer, Aldar Properties, to help the company meet looming debt obligations.

Analysts do not see Dubai's residential market bottoming out until the second half of this year at the earliest.

Four analysts polled said Dubai's house prices would hit bottom in the second half of this year.

Residential rents in Dubai are seen falling 10% this year and another 5% next year, as more homes come onto the market, forcing landlords to reduce rents to attract tenants. Developers are also keen to complete projects and get payments. — Reuters