Business | Property
Realty to witness 'profit correction'
Property prices in Dubai are not going to decline by 2010, as predicted by recent reports, but profits will correct, according to top officials at Dubai Land Department.
- By Suzanne Fenton, Staff Reporter
- Published: 00:07 October 2, 2008
- Image Credit: Gulf News Archive
- A Morgan Stanley report recently predicted a 10 per cent drop in property prices by 2010, sparking a massive debate in Dubai's real estate sector.
Dubai: Property prices in Dubai are not going to decline by 2010, as predicted by recent reports, but profits will correct, according to top officials at Dubai Land Department.
While many analysts and reports are predicting a depressing future for Dubai's booming property sector, there are still optimists who believe Dubai's success has only just begun.
"There will be a correction in some places, but a correction in profit only," Dubai's Real Estate Regulatory Authority (Rera) CEO Marwan Bin Galita said. "Rather than making 20 per cent profit, maybe investors will make five per cent profit. What have they lost?" Bin Galita added.
A Morgan Stanley report recently predicted a 10 per cent drop in property prices by 2010, sparking a massive debate in Dubai's real estate sector.
Investment bank EFG-Hermes also produced its own report recently, saying there would be a 20 per cent decline in property prices by 2011, adding fuel to the already intense issue.
Sultan Bin Butti Bin Mejrin, director general of Dubai Land Department (DLD), said that despite such reports, Dubai's property market remains robust. "In 2007, they said prices would go down. And the recent reports say prices will go down. But I said then it will be a very strong market. And it is," Bin Mejrin said. He said the property market here continues to be healthy with the Land Department registering Dh200 billion in transactions so far.
Strategic positioning
Abid Junaid, executive director of ETA Star Properties, agreed that a drop in property prices is not in sight. "Dubai's popularity with investors is to do with the lifestyle Dubai offers, it's strategic positioning in the Middle East and it's tax free. None of that has changed," Junaid said.
The Land Department has also registered 5,099 plots in Dubai up until now while the number of owners of varying nationalities has reached 10,872. UAE nationals and Indians continue to be the largest number of home owners.
Although economists at Standard Chartered had suggested the introduction of a 50 per cent capital gains tax to root out speculators, Bin Galita disagrees. "Why do you want to stop speculation? Speculators are good in some places. You need them because they encourage others to buy," he said.
However, he said in some areas, such as Dubai Marina, speculation should stop as the development is already built. Negative global sentiment coupled with the slow sales period of summer and Ramadan has had an affect on UAE sentiment, "leading to all this speculation," Junaid added.
The DLD also announced last week that a rental index would be announced after Eid Al Fitr, designed for newcomers to Dubai.
The index would work in conjunction with the new rent cap. However, officials did not elaborate on whether the new cap would be more or less than the current five per cent but Bin Galita said it would involve a "different mechanism."
"When people start seeing the index, [landlords] will be reasonable with their prices. Otherwise people will leave," Bin Galita said.
The new rental index and rent cap will also work alongside the standardised rental contracts. Bin Galita also hinted that Rera has major plans to become the reference body for the entire region.
Do you still expect property prices to decline? What is your plan for your property investments?
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