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DUBAI PROPERTY CRASH AVERTED BY EVICTIONS

Tuesday, 30 Sep 2008

According to revised reports, analysts no longer predict a drastic fall in the price of property in Dubai. In fact, the recent increase in property prices, together with the sudden glut of people seeking rental properties due to the villa evictions currently underway, will postpone the drop in prices. Cecilia Rabess, a senior analyst at Investment Boutique, said, “Demand will rise, and prices will follow as a result.”

A new Morgan Stanley report said that the price of Dubai property was heading for a 10% correction by 2010, after the increase of almost 80% seen in the market since the start of 2007. Analysts were sceptical about whether Dubai would be able to avoid becoming another casualty of the falling global property market, but the eviction notices that the Dubai Municipality distributed last week to families sharing villas have caused some analysts to change their gloomy predictions. Many now believe that the foreseen downturn in Dubai property prices might not happen as soon as they thought previously.

According to analysts, in July the rental for a one-bedroom apartment in the Dubai Marina was around $32,600 per annum, but last week one could not be found for less than $38,000. In 2008, the price of villas and other property in Dubai has leapt by 76%, and the price of apartments has increased by 63% according to The National’s survey last week.

Last week, Sean Gardiner, head of Morgan Stanley’s MENA research, said, “The good news for Dubai is that you have underlying economic strength and, as a result, our base case reflects a soft landing for the emirate.”

Ms Rabess maintains that the government’s reason for the villa evictions could have been to force people to seek accommodations in Dubai’s Discovery Gardens or International City, since they preferred to share a villa, but that this could eventually chase people right out of the city.