DUBAI: A widely watched index of Dubai property prices shows home values have plunged by half from their peak last year, making the once-booming Mideast city one of the worst casualties of the housing bust.
Colliers International said Monday prices in Dubai shed 9 percent of their value between April and June, putting them 48 percent lower than in the same period a year earlier.
Prices have now tumbled by half from their peak in the third quarter of 2008. A rebound to those levels is unlikely to occur anytime soon, Colliers regional director Ian Albert said.
“The key factor that will really dominate Dubai’s recovery will be the global economy, because we are really integrated into that,” he said. “Dubai’s recovery as a business hub will depend on what’s going to happen in Europe and the US” The rapid drop leaves homes in the city-state — many bought as investment properties by middle class and wealthy foreigners — worth what they were two years ago.
Some of the reasons for the slide will be familiar to homeowners in the US or Europe. The availability of financing, for example, has become significantly harder to get as a result of the financial meltdown.
But other causes are more localized. Colliers cites job concerns among expatriate workers and a lack of transparency about construction delays as factors hampering the market’s recovery.
As many as nine out of 10 Dubai residents are foreigners whose residency permits are contingent on continued employment in the emirate.
Builders have responded to the downturn by canceling or delaying billions of dollars’ worth of property projects, putting thousands of employees out of work.
Analysts at Egyptian bank EFG Hermes predict Dubai’s population will shrink by 17 percent this year as foreign workers lose their jobs and head home. Swiss bank UBS is forecasting a drop of 8 percent.
Albert likened Dubai’s dramatic property price drop to earlier steep declines in Singapore and Hong Kong, which he said were hurt by their strong ties to the world economy and “excessive speculation.” Like Dubai, both cities developed small waterfront territories into global financial and trading centers bristling with skyscrapers.
Colliers bases its index on mortgage data from local and international lenders. It measures prices in parts of Dubai where foreigners have been allowed to buy since the market was opened in 2002. Those areas were largely responsible for Dubai’s real estate boom.
The consultancy said the going rate for Dubai residential property now averages 949 dirhams, or about $260, per square foot.
Albert said he does not expect signs that the Dubai market is stabilizing to emerge until at least the end of the year.