End of six-year property market boom in Dubai causes real estate value to drop

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END OF SIX-YEAR PROPERTY MARKET BOOM IN DUBAI CAUSES REAL ESTATE VALUE TO DROP

Tuesday, 04 Nov 2008

For the last six years, property in Dubai has been booming, but experts now agree that the worldwide financial crisis has put an end to this burgeoning property market. It seems that there are some property sellers who are so desperate to liquidate their assets as soon as possible that they are proffering off-plan properties at zero premium and suffering a loss as a result. It’s been reported that one Dubai estate agent has reduced its commissions by almost 70%, although most appear to be confident that they can ride out the slump for at least six months, to find out if the economy, and therefore the Dubai property market, recovers.

This evident collapse in Dubai property prices will naturally increase the strain on the economy, which lacks the vast oil revenues to bolster it that other emirates, like Abu Dhabi, enjoy. Even if Dubai did enjoy an oil rich economy, which the entire region’s wealth is based upon, oil appears set to drop even lower as global demand for the commodity decreases.

Many of the banks in the region have taken steps to make sure borrowers are not allowed to get loans that they are not able to repay in these tumultuous times. For instance, HSBC will now only loan up to 70% of the value of a Dubai property, which is reduced by 15% from October. Apparently this is to ensure that borrowers don’t default on their repayments, thus helping the property market in Dubai to continue to be stable and bounce back sooner rather than later.

There are those investors, however, who believe that the current low prices of accommodation in Dubai makes it a good time to invest there, provided they are able to keep the property until the prices recover.

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