The year 2009 has been a year of many changes in the Dubai property market. It has become clear that the earlier boom period seen over the last six years or so has come to an end, and the market is clearly in a downward spiral. Many are wondering when it will bottom out, and it is expected that some of the lowest price levels will be seen in March-April next year. A few analysts are even prone to equate the Dubai housing and financial crisis to the larger crisis that the USA and the world is facing nowadays. They say that a recovery in USA is likely to be followed by a recovery in the UAE. While the events in the USA do not seem to be directly connected to the happenings in the UAE, yet there is always a psychological connection in the markets somewhere. A recovery in one area of the world is likely to spur investor confidence in another, unless there are very local country-specific reasons behind market behavior, such as a corporate scandal or a default in debt repayment.
As if the slowdown in the USA had not affected Dubai enough already, the mishandling of the Dubai World debt repayment issue was another factor that has dampened market sentiment. Something drastic needs to be done to recoup investor confidence. Too much has happened already. The Dubai Government’s initial support, then insistent refusal to bail out Dubai World sent mixed and confusing signals all across the investment world, many wondering if the Dubai Government was itself going bankrupt. Nothing could be further from the truth, as both the Government of Dubai and the Dubai World entity have enough assets to comfortably pay off their own liabilities respectively. That said, the atmosphere of uncertainty remains and even though the Government of Abu Dhabi has pitched in by lending Dubai World US$10 billion to meet its debt obligations, the market has not recovered.
Indeed this crisis of confidence will have to be addressed and corrected if Dubai is to make it out of its present imbroglio. According to some estimates by real estate firms in the UAE, Dubai property rental rates have fallen this year across all property types in the emirate. For instance it was found that on the average, villa rentals fell by 35 percent, while apartment rentals fell by 20 percent. In view of falling prices, landlords and property owners in Dubai have begun allowing tenants greater grace periods and a change in renting options to pay with up to 12 checks in advance while renting a property. While access to bank financing has become restricted, tenants have found better lodgings at affordable prices after the exodus of many foreign workers. Another related fact is that newer developments are attracting the majority of consumer interest as units come online and the surrounding infrastructure nears completion.
At the same time, villas and marine residences located strategically near retail shops and restaurants- with ready access to the city- are commanding better rents and prices than other properties. The occupancy rate here concerning Dubai Villas for Rent was also better. Meanwhile the sale prices of apartments have in general suffered a larger fall than rental rates, with the decline averaging 40 percent. It is expected that prices will begin to stabilize when each project nears completion.
It was also found that sale prices for villas in Dubai fell by an average of 45 percent over last year. With the market converting from a seller’s to a buyer’s paradise, tenants are now in a stronger position to re-negotiate rental contracts. Landlords have realized that they have to entice tenants with competitive rents, or offer alternative payment options and benefits to retain them.
The good news for tenants who want to rent property in Dubai is that rental prices are unlikely to rise in the short term as Dubai adjusts to changing rates of worker movement and more units come into the market.
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