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Cityscape Dubai opens

Catherine Deshayes

Cityscape Dubai, the largest business-to-business real estate investment and development event in the world, opened today amid the shock news that Dubai house prices fell 16 in the second quarter of this year...

The figures were met with an intake of breath as they had been rising sharply and although analysts have been predicting a slowdown few expected such a drop at this time.

The figures, from leading international property consultants Colliers, indicate that Dubai's six year property boom is at an end with the company predicting figures will remain flat for at least 12 months, probably until 2010.

'In the first quarter, the average price went up by 43 per cent while in the second quarter they came down by 16 per cent,' said Ian Albert, a Regional Director at Colliers International. He attributed the drop to seasonal trends and a possible inkling among investors of the looming credit crunch.

Colliers said the main threat to house prices was liquidity in the financial system. A shortage of cash has already doubled the interest rate that banks charge each other in the last four months to more than four per cent. Many home finance companies have restricted the amount of money they lend to 65 or 75 per cent of the property's value, and home finance rates have risen to about eight per cent.

'Future performance will be hinged on liquidity. Everyone in Dubai is now looking for the magic figure on how much prices will fall, but because of what's going on in the US and Europe, we won't know where we are in terms of liquidity for at least another two to three months. Prices have so far mainly appreciated through speculation,' added Albert.

He concluded that although mortgages will be harder to come by, demand would remain strong, with the market moving away from off-plan speculation and back to basic fundamentals, such as providing a good quality product.

The news should be taken as a wake up call but should also be seen as an opportunity to look at other markets. 'Now, as the world faces up to market uncertainty, we enter a new era in which Middle East developers are expected to maintain and even increase their presence throughout the world,' said Rohan Marwaha, Managing Director of Cityscape.

'The sheer scale and intensity of the iconic projects in one of the most impressive property booms in modern history has kept the UAE, and Dubai in particular, in the headlines worldwide for the best part of a decade,' he added.

Source: www.propertywire.com