Dubai: Property prices and rents are expected to ease further in the short term, Dubai Chamber of Commerce and Industry said in a report unveiled at an economic seminar held yesterday.
Ehsan Khoman, Economic Researcher at the Dubai Chamber, said, "Demand-supply dynamics are heavily tilted towards oversupply due the significant size of construction projects over the years."
The study revealed that Dubai's real estate market had focused on high- and ultra high-end of the market segment. "It is not just the oversupply that's a problem," he said. There are other factors.
"Due to lower confidence in the real estate sector and subdued demand, the prices and rents could dip further, he said.
Khoman said the sector, however, will recover in the medium to long term.
"In the medium term rental yields and property prices are expected to stabilise as growing confidence shows signs of a recovery," he added.
Khoman predicted prices could soar to the pre-crisis level.
"With lending conditions predicted to ease on lower interbank rates as well as overall sentiment being restored, rental yields and prices are forecast to return to pre-crisis levels," he told participants at the seminar
The study said government intervention has bolstered the market.
For instance, the study cited actions taken by Dubai Land Department and the Real Estate Regulatory Agency (Rera).
Property visas
Visas linked to property ownership are quite important to the real estate sector as homeowners and investors are now allowed multiple entry visas into Dubai for a period not exceeding six months.
The study also stresses certain regulations, especially in a situation where a developer is allowed to retain 30 per cent of the contract value in the case a buyer cancels an off-plan purchase.
"So off-plan buyers wishing to cancel will have to forfeit 30 per cent of the total value of the unit," he said.
This was issued to discourage investors from panic cancellation of deals.
Khoman said further measures can boost investor confidence and revive overall demand in the market.
"Thus, in order to enhance the level of transparency, professionalism and overall confidence in the market, certain policy recommendations can be made."
For instance, residency visas linked to property ownership of foreign nationals can help regenerate confidence in the real estate market, Khoman said.
The study showed how the recent performance in the real estate sector and the falling realty prices have provided relief to residents and businesses alike. Those with sufficient capital now have the opportunity to make a greater return on investment.
Dr Belaid Rettab, Senior Executive Director, Economic Research and Sustainable Business Development, maintained that the UAE economy is expected to return gradually to solid real GDP growth, underpinned by higher oil prices, robust government spending, and normalisation of global trade and capital flows.
Export performance
Rettab said that despite the effects of the global financial crisis, Dubai has managed to attract foreign direct investment.
Another study by the Dubai Chamber showed that trade was returning to normal as the financial crisis has not dampened exports. Most exporters found markets and expanded while only a few saw their markets contract.
The study said that the main challenge to the UAE's financial sector in supporting strong economic recovery is the sluggishness in growth of private-sector credit. To revive credit and to boost confidence in the long-term stability of the UAE financial system, UAE policymakers have taken decisive actions to strengthen banks' capital and liquidity positions.
$1b bond planned
Dubai's government will seek to raise about $1 billion next week from the sale of a five- to seven-year bond, said two bankers familiar with the plan.
HSBC Holdings Plc, Deutsche Bank AG and Standard Chartered Plc were hired to manage the sale, the bankers said, declining to be identified because the transaction is not public yet.
The Dubai government declined to comment when called by Bloomberg News. Spokesmen for HSBC and Standard Chartered also didn't comment, while a spokesman for Deutsche Bank couldn't be immediately reached.
