Property rates in Dubai are on a falling spree. Investors will have to wait 7-10 years for better returns, says an expert
Property prices in Dubai are dropping drastically. They may further decline by about 30%, says an expert. Real-estate investors will have to wait for 7-10 years to receive good returns.
“There is an expectation of further reduction is property prices by 30% in Dubai. Prices are already one-third of their original levels,” said Pranay Vakil, chairman, Knight Frank India Pvt Ltd.
He said, “A villa on Palm Island which was selling for 12 million dirhams about two years back is now available for 4 million dirhams and we expect it to go down to 3 million dirhams.”
The peak price for the blocks surrounding the Khalifa Tower reached $20,505 per square metre in 2008, while the current price has dropped by nearly 70%.
Dubai’s relentless pursuit of growth received an unprecedented jolt in November, when its heavily indebted flagship holding company, Dubai World, announced plans to restructure loans worth $60 billion. Dubai World’s real-estate arm Nakheel was in the doldrums, after a 50% drop in real-estate prices forced it to ask for a trading suspension of its Islamic bonds. Dubai World has sought a moratorium on its debt obligations for a period of six months.
The central bank of the United Arab Emirates (UAE) had stated that it is setting up a facility to provide banks with extra liquidity, as it seeks to battle perceptions that Dubai cannot support its own companies.
According to media reports, the key factor behind the crisis was the policy of the UAE central bank. After closing at 4% in October 2006, the yearly rate of growth of the central bank's balance sheet (the pace of monetary pumping) climbed to 177% by December 2007. In response to this pumping, the yearly rate of growth of UAE's monetary measure AMS jumped from 6% in October 2006 to 62% by April 2008. This massive monetary inflow supported various projects.
In November, research firm Proleads said that some 1,845 projects worth a combined $657 billion were still active in the UAE despite the impact of the global slowdown. The study of the civil construction industry in the country showed that 69% of the total projects were ongoing (not cancelled or delayed).
Meanwhile, according to an AFP report, managers of the Burj Khalifa, the silvery, needle-like skyscraper in Dubai, shut down the tower's 124th-floor sky deck early this week, disappointing hundreds of tourists. The observatory, about two-thirds of the way up the tower, was the only part of the skyscraper open to the public.
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