2010 to be great for Dubai realty

Dubai: House prices returning to pre-2007 levels in Dubai will herald in a 'vintage year' for real estate investments in 2010, says a leading industry report.

With the worst part of the financial downturn generally thought to be over, investors are full of optimism and are focusing on 2010.

Happy investors in 2010, dubbed the vintage year for regional real estate investment, will be those owners who ensure their assets are realistically priced, professionally managed and offer stable, long term contractual cash flow, said a recent report by Jones Lang LaSalle.

"What we can see now is a clear rationale for investment strategy over the next 12 to 24 months and a recognition that the right products located in the right places will attract investment&While short-term concerns around liquidity and over supply remain, a return to 2007 pricing will see Dubai enforce its competitiveness as one of the region's leading destinations for investment," said Ian Ohan, head of Mena Investment Transactions at Jones Lang LaSalle and author of the report.

The entire Mena region was one of the last to feel the hit of the economic downturn but its real estate markets were among the fastest to adjust, with property prices falling up to 50 per cent in certain areas in the past year.

"Sale activity is expected to pick up marginally in 2010 as financial pressures slowly begin to ease and the psychological boost of a new year raises investor sentiment and confidence in the market. Those investors with cash to spend will look to benefit significantly with sales prices now largely prevailing at 2006 levels," said Matthew Green, head of research and consultancy at CB Richard Ellis.

Investors are much happier now with the state of the market than in recent months. This newfound sunny optimism is being primarily driven by the overall economic strength that is synonymous with hydrocarbon-based economies, said the report.

Abu Dhabi, Saudi Arabia and Qatar are the real estate markets expected to recover first in the region due to stronger economic fundamentals and government initiatives. These three will experience greater increase in pricing and performance in the coming year.

However, Dubai is forecast to grow at a steady rate of four to six per cent per year until 2015, according to Chesterton International.

"It is interesting to note that the balance may even reverse in certain areas. There may well be a shortage of villas in the future as they appear to make up a reducing percentage of the property being delivered over the next few years," said Brendan Coakley, managing director of Chesterton International.

Investors recognise Dubai as regional leader in terms of city competitiveness and real estate infrastructure.

While Dubai's success in the past has been largely built on its name as a city being built from practically nothing and its good infrastructure, concerns remain over the availability of capital for real estate purposes and the supply and demand dynamics.

"The lack of liquidity and the unwillingness of some financial institutions to begin lending in earnest is certainly proving to be a major barrier for the Dubai market. However, what is more concerning is the considerable volume of new stock either completed or in the pipeline, combined with minimal levels of demand. This supply and demand imbalance is really the main issue and an encumbrance that will hinder any future recovery," Green added.

Going into the future emphasis is once again put on the need for increased transparency and honesty from developers, brokers and investors themselves.

However the 'litmus' test, marking the true confidence of the market will come in December when Nakheel is due to refinance its maturing bonds.

If they cannot be paid, this could potentially shake the confidence of the whole industry including government.

"The general feeling is that they will get paid simply because the alternative is far worse," Ohan told Gulf News.