Opportunities up for grabs as Dubai real estate set to dip

Dubai: Residential property prices in Dubai have further to ease going in to 2010, providing serious end users a plethora of investment opportunities.

About 71 per cent of developers say that prices have not yet bottomed out, according to a Colliers International survey.

Only 25 per cent of developers say prices have bottomed out with a remaining four per cent not giving a comment.

Eighty-two per cent are still selling their units in the market, compared to 18 per cent who have paused sales activity.

House prices have already tumbled as much as 50 per cent in some properties across Dubai this year, the sharpest correction in the Gulf Cooperation Council.

"With the oversupply [situation] now and its continuation, prices will only level out once demand starts to exceed supply," JP Grobbelaar, corporate director at Colliers International, said.

While it is difficult to project how much further residential prices could potentially fall, Grobbelaar said, "a further 20 per cent isn't unrealistic."

Rental rates

Rental rates too will come down further in the next 12 months. With the need for developers to turn their attention to affordable units, this too will create opportunities for those people who had previously been priced out of the market.

Interactive map: Dubai rental index

Affordable housing that used to be available in Dubai, in places like Jumeirah and Satwa, has been demolished to accommodate luxury housing .

"For housing to be affordable, developments need to be pitched at that market. [This] is based on size of the accommodation, facilities and so forth, but yes, there is a huge market for more affordable housing. They have demolished housing that was affordable and built luxury housing ... but obviously developers will go where the margins are greater, that's business," Grobbelaar told Gulf News.

There will be 340,000 residential units available in Dubai by the end of the year with a further 34,300 units due to be released by 2011. This will take supply in excess of 374,300 to 415,000 units.

Vacancy levels in both the residential and office markets are similar at around 25 per cent.

Dubai's population is 1.5 million but unless there is a significant increase of population in the next couple of years, these vacancy levels will increase or, at best, remain the same, Grobbelaar said.

Silver lining

"The drop in prices has created a number of excellent opportunities. It's not all doom and gloom; some people are going to make a lot of money out of very, very good investment opportunities," Grobbelaar said.

Even with current supply levels of office space at 3 million square metres, the market is oversupplied, yet an additional 3 million square metres is due to come onstream in the next two years.

By the end of 2011, there will be around 6 million square metres of office space needing to be filled.

Retail rental rates have softened 18 per cent based on renewals of existing contracts in malls and new leases being negotiated in new malls under development, such as Mirdif City Centre and Mall of Arabia phase one.