DUBAI: Soaring housing prices in Dubai are likely to peak in 2009 before falling at least 15 percent as the Gulf emirate takes measures to weed out short-term speculators, a Reuters poll showed yesterday.
Residential property prices in the desert city are likely to jump 35 percent this year, according to the median of forecasts from 10 analysts at banks, investment firms and research institutions.
Price growth will probably slow to 8.5 percent next year, when five of nine analysts expect prices to hit a peak after double-digit increases in each year since Dubai opened its property market to foreign investment in 2002.
“After four years of tremendous price growth the market needs a breather,” said Robert McKinnon, managing director of equity research at Al-Mal Capital and one of the analysts questioned in the poll carried out from Aug. 18 to 25. “Dubai has taken some measures to tackle speculation which will have some impact on the market.”
Six of the analysts say prices could fall at least 15 percent from peak to trough, including one expecting a drop of more than 30 percent. Two foresee no correction in prices at all and two anticipate declines of 10 percent. The Reuters poll found a 32.5 percent chance of a correction in Dubai. Five said the chance of a correction exceeded 50 percent.
Speculators in search of quick gains have been a main driving force behind the 79 percent surge in Dubai housing prices since the start of 2007, according to investment bank Morgan Stanley.
Expatriates from neighboring countries facing political instability, such as Pakistan, Lebanon and Iran, for instance, have long been lured to Dubai by its safe-haven status. “There is enough demand to take the place of speculation, but the demand is at a different price level,” McKinnon said.
Even as speculators exit the market, analysts said a sharp fall in prices was unlikely since the state exerts extensive control over supply.
