A report recently released by HSBC bank said that property prices in the emirate had risen by 4% in April and 5% in May.
'Market data from April and May show a range of positive indicators: Agreed property sale prices are rising, volumes are holding up well, and banks have loosened their lending criteria,' said the report. '[But]We will not be able to discern a sustainable trend until later in 2009.'
Analysts from Deutsche Bank and UBS are more pessimistic on the sector's outlook. Citing the number of new units that are expected to hit the market, and the question mark over the predicted population fall, both banks are expecting further falls in prices.
'We expect UAE property prices to decline another 15% to 20% from current levels, and only expect a bottom by year-end', stated Deutsche.
UBS issued an even more negative prognosis, estimating a further 40% price fall by Q4 2010, when a glut of new units would push vacancy rates in the city from an estimated 15% currently, to over 33%.
Rise in transactions
Real estate firms in the city, however, have been quick to pounce on the uplift in transactions and the slowdown in depreciation as a turn in the market.
'I'm not sure whether 'bottoming out' is the right phrase, but you can certainly say that stabilization is coming in,' Charles Neil, CFO at Landmark Properties told AME Info.
'There was a very rapid fall in prices for both rentals and sales, some of it, I think, spurred by panic over November, December and January. What we have noticed over the last few months is that the difference between the listing prices and the transactional prices has narrowed. It's a sign that sellers are actually not prepared to go lower, they'd rather withdraw their properties from the market.'
Sector analysts have noted a similar trend in the market. '[After falls of up to 40%] The first signs of stabilization in Dubai's real estate sector have appeared, taking observers by surprise since further declines were expected. Some caution is warranted, as there are still question marks surrounding population flows in the coming months,' Standard Chartered said in a sector report.
Neil puts the upsurge in transactions down to a number of deals available to cash buyers - and the beginning of a slow return to liquidity, with local banks returning to lending, although under stricter criteria.
'The two biggest providers, Tamweel and Amlak, who had 60% of the market are not back in at all, and we don't know when they will be. Commercial banks are starting to come in, and they are obviously looking to grab market share, and some are being quite aggressive. Lending is now safer for them because prices have come down, and assuming that they aren't going to fall much lower, they've got a good cushion now.'
Market 'still seeking bottom'
But not all market watchers agree with the view that the market is turning. 'I don't agree that the market has bottomed out, unfortunately I think that we still have a while to go,' Heather Wipperman-Amiji, CEO of real estate advisory firm Investment Boutique, told AME Info. Current estimates point to 45,000 new units expected to come onto the market in 2009/2010.
'If you could turn off the tap in terms of new supply coming online, and look strictly at transactional activity and asking prices, then maybe you could call it - but the reality is that you can't, and the new supply is going to have a considerable impact on pricing.
'For sellers and buyers, there's also been a desire to see a deal done before the summer and Ramadan, because they can see a real slow down in the market. So I think that has helped with the pick up in activity. At the end of the day everyone would like to see a bit more activity, but they [real estate groups] are looking at symptoms rather than causes. I don't see how it's possible that we've seen the bottom given the amount of supply that's going to come online and the predicted population decline over the summer and what that knock-on effect will be for businesses again.'
Return to stability
This ties in with UBS estimates that up to a third of properties in the city will be lying empty by the end of 2010, as more projects reach completion.
'I'm hopeful that by Q3 2010 you may start to see more stability in the market,' says Wipperman-Amiji. 'Right now, developers with projects that have 20% to 30% to go on their build are desperate to complete because they want that final payment. But those who are less than 50% in are slowing down or putting things on hold while they see what happens in the market.'
Neil agrees with the long range forecast: 'I don't see prices moving very quickly in 2010, but they will start to increase in 2011. In the majority of markets prices come back to where they left off from, so that could be between five and seven years in our view.'