90,000 housing units to enter market

Dubai: New units are set to enter the Dubai realty market over the next two years, despite the global financial downturn.

However, this figure is likely to drop due to declining demand, tight liquidity and strict financing options.

Approximately 32,000 new residential units were completed in 2008, bringing the total number of residential stock in Dubai to around 253,000.

Cancellations and construction delays will reduce the total announced residential supply by more than 50 per cent - with around 90,000 more units set to come on to the market between 2009 and 2011 - according to a Lang LaSalle report.

More than 50 per cent of the announced residential and commercial projects due for completion between 2009 and 2012 have now been put on hold or cancelled due to lack of available funding and easing demand.

Because of the global financial downturn, even top developers, such as Nakheel and Meraas have been forced to reschedule, postpone or cancel some of their projects.

These projects include Nakheel's kilometre-tall tower and Trump International Hotel and Tower and Meraas' Jumeirah Garden City which, at a cool Dh350 billion, involved various microclimates and a mini-Manhattan.

Since the last quarter of 2008, prices have dropped and so have rents, up to 50 per cent in certain areas of Dubai, according to officials at Dubai Land Department.

Prices generally, not just for residential properties, are expected to continue falling throughout this year and bottom out some time in 2010, said Craig Plumb, head of research in Mena region, Jones Lang LaSalle.

Ahmad Shaikhani, managing director, Memon Investments, earlier said he expects the UAE real estate sector will "bounce back" within the next eight to 12 months due, in part, to the fall in construction costs by an average of 30 per cent.

Falling prices create huge opportunities to snap up properties for bargain rates.

However, those wishing to buy property are being barred by huge deposit requirements.

"The original problem was that banks didn't have the money to lend. Now, banks have this but are nervous about lending to real estate.

"So while they have an increased ability to lend, the banks are still being risk-averse," Plumb told Gulf News.

The report recognised the need for increased fin-ancing options, saying that the government needs to implement some "more radical measures" like removing the link between employment and residency status and a clarification of the law providing for residency for expatriate purchasers of residential units may be required to provide a floor to the market.

Nervous investor sentiment coupled with lower rental rates will encourage residents to lease rather than buy and landlords, too, have been more flexible with payment terms.

"More people are leaning towards that [renting] because prices are falling and people don't want to buy in a declining market. But it's like catching a falling knife - no one knows when the market will stabilise so it's hard to predict the bottom," Plumb said.