Fluc­tu­a­tions due to oil prices is ad­just­ing in places across Dubai

The Pak Banker - - 6BUSINESS -

Realty prices seem to be soft­en­ing dur­ing the sec­ond half this year. An­a­lysts forecast that the Dubai real es­tate mar­ket is ex­pected to face a fur­ther down­ward pres­sure dur­ing the sec­ond half of 2015, which might at­tract more buy­ers who would see the in­vest­ment un­der value.

How­ever, it might also push cer­tain de­vel­op­ers out­side the mar­ket. The drop in prices is seen by ex­perts as a "cor­rec­tion" to the in­fla­tion that took place, rather than a mar­ket cri­sis. "We be­lieve com­pa­nies have the pos­si­bil­ity to ad­just the pric­ing of their prod­ucts if the sup­ply vol­ume re­mains so high and there is pres­sure on the sales price," said Franck De­lage, di­rec­tor of cor­po­rate rat­ings for Europe, the Mid­dle East and Africa at Stan­dards & Poor's.

De­cline in sales ac­tiv­ity can be traced back to the fourth quar­ter of 2014 when fluc­tu­a­tions in oil prices im­pacted in­vestor sen­ti­ments. Ac­cord­ing to an­a­lysts, the prices were high and un­sus­tain­able; hence, the on­go­ing price re­duc­tions are an ad­just­ment within the mar­ket.

Al Barari, Dubai Ma­rina, Down­town Dubai and Ara­bian Ranches de­creased the most by 20 per cent, ac­cord­ing to Ken­dal, a real es­tate firm. Prop­er­ties such as Emi­rates Liv­ing (The Springs, The Lakes, The Mead­ows) and Jumeirah Lake Tow­ers have de­creased by 1015 per cent. Prices in Down­town Dubai have seen the ma­jor drop due to their sharp in­crease. The prices around Dubai, ac­cord­ing to JLL and Stan­dard & Poors, are forecast to fur­ther drop by 10 per cent. An­a­lysts say the prices are ex­pected to fur­ther drop un­til the end of the year, if all cur­rent cir­cum­stances stay the same.

"The ma­jor de­crease in prices took place in villa and lux­ury houses, This is due to in­creased sup­ply com­ing in from var­i­ous new projects launched over the last three years, some of which were re­cently com- pleted, cur­rently off-plan or near com­ple­tion. These new projects are of­fer­ing many at­trac­tive deals & op­por­tu­ni­ties to in­vestors in­clud­ing some deals be­ing sold at neg­a­tive premi­ums from what they were orig­i­nally pur­chased at," said Keone Ser­nan­des, a sales leas­ing and con­sul­tant at Ocean View Prop­er­ties, a real es­tate firm in Dubai.

Ac­cord­ing to Ocean View, a de­cline has been seen all across Dubai with less pop­u­lar de­vel­op­ments like Dubai Sports City, Busi­ness Bay, Jumeirah Vil­lage Cir­cle. "These new and up­com­ing de­vel­op­ments will have to of­fer buy­ers su­pe­rior qual­ity prod­ucts at very good prices and pay­ment plans as buy­ers now are look­ing for more value for their money and would pre­fer to buy in more es­tab­lished com­mu­ni­ties un­less they are be­ing of­fered deals they can­not refuse," said Fer­nan­des.

Gi­bran Bukhari, CEO of real es­tate firm Prov­i­dent Es­tate said the de­cline in prices is seen in prop­er­ties that do not have proper in­fra­struc­ture such as ar­eas where there are lack of schools, or proper green­ery. "The ma­jor re­al­is­tic cor­rec­tion of the prices took place in Jumeirah Vil­lage Cir­cle, Jumeirah Vil­lage Tri­an­gle, Dubai­land and Busi­ness Bay," said Bukhari. Due to the im­pact of oil prices, the over­all mar­ket has been af­fected in Dubai which could be a rea­son why peo­ple are re­luc­tant to buy. How­ever, as oil prices drop, we see the real es­tate mar­ket read­just­ing or "cor­rect­ing" the pre­vi­ously fluc­tu­ated prices.

S & P forecast in June that oil prices will re­main weak to the end of 2016. Hence, they ex­pect that over­all eco­nomic growth in the UAE will likely slow markedly. The agency said Dubai's stock in­dex would likely to af­fect in­vestor views on prop­erty. "The fluc­tu­a­tion in oil prices has im­pacted in­vestor sen­ti­ment which has in turn im­pacted sales ac­tiv­ity, where we saw a slow­down in trans­ac­tion ac­tiv­ity. This slow­down saw real es­tate prices drop marginally to lev­els that ap­peal to end-users in the mar­ket," said Dana Sal­bak, Real Es­tate Re­search Man­ager at JLL Mid­dle East and North Africa (MENA). Sal­bak, added that JLL ex­pects to see a fur­ther 10 per cent drop sale prices in 2015.

Dana ex­plained fur­ther that the lev­els of de­cline in trans­ac­tion ac­tiv­ity have re­sulted in a sin­gle-digit de­cline in sale prices, con­trary to the ma­jor declines seen in 2008-2009 "mak­ing way for more end-user in­vestors as op­posed to spec­u­la­tive in­vestors".

Peo­ple buy prop­er­ties in Dubai ei­ther as in­vestors or end use in­vestors. End-use in­vestors have be­come more hes­i­tant to buy in the Dubai mar­ket. Ac­cord­ing to Danny Terry, Man­ag­ing Di­rec­tor of Ken­dal firm, their hes­i­ta­tion is due to the drop in prices, as they wait for the low­est the prices can get. Mean­while, Terry ex­plains, the in­vestors mar­ket has slowed down due to the gov­ern­ment's reg­u­la­tion.

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