Property market slows in Dubai and Abu Dhabi

Dubai and Abu Dhabi's real estate markets have started to show signs of slowdown, according to fresh figures from the Dubai-based Better Homes property group.

A new report from Better Homes says the slowdown is not caused solely by the present widespread economic woes but that a combination of Dubai government's corruption probe, new mortgage laws and a regular seasonal slowing are all adding to the worries.

According to Niraj Masand, director of commercial operations at Better Homes, the summer and Ramadan are typically the slowest parts of the business year, but activity this quarter is clearly down on the same period in recent years.

“To a certain extent the Dubai property market was anyway overheated and a slight correction was round the corner. The global crisis has made investors slightly more cautious,” he said.

Investor worry about the market situation has not made the Gulf immune from any potential price falls, said Masand. “An estimate would be around a 15% drop for residential prices. A drop is likely in the value of those properties to be delivered two to three years down the line,” he said.

Distress among short-term investors too is showing already, says the report. It cites an example of a commercial building at Dubai Waterfront being sold at a negative premium as global markets squeeze liquidity and local banks rein in any lucrative financial deals. The report says more of this type of sale are likely.

But the drop may only be temporary, depending on market situation. “Anything that will be ready in 2009 will sustain and see even premiums being demanded,” Masand said.

The demand for office space in Dubai outpaced Abu Dhabi during the quarter - especially in sought-after business districts such as Meydan, Dubai Waterfront and Jumeira Lake Towers.