Oversupply Keeps Home Prices Low in UAE

According to many Dubai real estate experts, the ongoing property slump across the UAE, which includes Dubai as well, will continue making headlines, till the end of 2012. Developers, contractors, investors and construction companies are struggling to find a footing in bond market. Until the conditions improve, properties will continue to sell at lower prices. For this reason, the leading construction companies and developers are forced to delay their bonds issuance time.

Dubai, the desert jewel, was once the most popular destination for many wealthy investors for purchasing property to spend a family holiday and as an additional source of income by renting but things are not the same anymore. Real estate investors who are keen to invest in international properties claim that the UAE in general and Dubai in particular has a huge number of properties available for sale at prices that are much lower than they were in 2008. The property assets have lost their original worth, forcing developers to not consider them worth investing or liquidating at this point.

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Drop in Home Values!

Global economic crisis has badly affected property market in Dubai more than any other sector of the UAE. After 2008, a visible droop (of more than 60 percent) was seen in Dubai residential property values and in Abu Dhabi property prices (around 50 percent), as investors fled the market. Despite the states, it does not mean that Dubai is no more an attractive destination for tourists or investors. It is just that property transactions are down from their peak time that has lead to oversupply. There is a chance that these prices might drop down further. Residential properties are expected to decline even more as more properties are in pipeline and investors’ population is not growing at the same rate.

Government is taking practical steps to bring back the investors and bring supply down. Therefore, it has cancelled numerous property projects and but these steps have not shown any dramatic results right yet. Government has also announced to extend residential visa span from 6 months to 3 years. It is not a permanent change in the visa policy, so nothing can be predicted right now about the future of the UAE property market.

Conclusion!

Major construction companies are still earning good revenues from their already completed and developed projects. But the picture is quite different for small contractors and developers, where for them, a lot property projects are in the pipeline and a few of them are already rejected by Government. Major companies want to raise high amount by selling their shares and bonds but they are holding back their bonds and waiting for favorable market conditions. Fingers crossed! Let’s see when the good times return to the UAE and increase the worth of its real estate once more.

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