Dubai prices rise, but analysts warn against over-optimism

A report published this week by finance house Deutsche Bank found that the average price in 13 'key' real estate locations around Dubai stood at Dhs1,285, a 6.5% increase on prices in the same areas in May.

During the same period rents in the city rose by 1.1%, after falling 10% the previous month, according to the report.

The rises were attributed to easing pressure from distressed sales and 'potential remaining sellers now being unwilling to sell at current prices', according to report author Nabil Ahmed.

Deustche has stated that prices in some developments in Dubai are down 50% from their peak.

Stating that 'the worst increasingly looks behind us', the report said that: 'Although monthly data should be viewed with caution given the limited number of transactions, recent numbers tend to confirm the stabilisation in the market [that we have seen developing]'.

Further price falls

Deutsche still predicts that property prices will continue to fall as the year progresses, with room for further drops of between 15% and 20%, with the market bottoming out in Q4 2009. The report highlighted the relatively low level of transactions and demand, the expected summer expatriate exodus and the new supply expected to come online through the second half of 2009.

The predictions are in line with other analysts expectations that the above combination of factors will mean that the Dubai market still has further to fall before bottoming out. '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 [a turning point] - but the reality is that you can't, and the new supply is going to have a considerable impact on pricing,' Heather Wipperman-Amiji, CEO of real estate advisory firm Investment Boutique, told AME Info in an earlier interview.

Similarly to the Deutsche report, property consultancy Sherwoods is also predicting a resumption of sector growth in Q4 2009. 'The positive signs that we are seeing should result in more tangible proof of growth around the fourth quarter of 2009, during which property prices will further stabilise and we can also expect a marked increase in property investment,' said Sherwoods Managing Director Iseeb Rehman.