RISING HOUSE PRICES IN DUBAI FUELLED BY NEW PROPERTY DELAYS
Monday, 22 Sep 2008
According to a report by EFG Hermes Holding, builders that are constructing homes in Dubai have experienced a host of setbacks due to a paucity of building materials and rising costs. These problems are causing delays and even postponements of vital projects, which in turn are fuelling the rising price of property there. The price of residential property in Dubai has risen 14.4 percent this year alone, EFG Hermes’ analysts say, as opposed to the predicted increase of only 5 to 10 percent. Last year the price of Dubai property increased 18.9 percent instead of the 10 to 15 percent rise that was forecast.
EFG Hermes is Egypt's largest publicly-traded investment bank, and Sana Kapadia, one of its analysts, said in his emailed report that the delivery of new Dubai properties “came short of our expectations for a fourth year”, and “the supply of new units remains a key determinant of the timing of a potential correction”.
The shortages of building materials and rising costs have forced some development projects to shut down, while others have been unable to get off the ground at all. This has made EFG Hermes’ prediction of constructing 64,000 new houses on property in Dubai this year something that is not likely to happen now, according to the report. The bank does still expect to build 70,000 new homes in the first six months of next year, however, which will help to alleviate the current shortfall.
The report also warned that the rerouting of cash funds from Abu Dhabi and Dubai, plus the diminishing worldwide financial conditions for emerging markets and the rising price of accommodation in Dubai are all contributing factors that might very well bring about a more drastic price adjustment in the near future.
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