Press Release 01/08/2010
Average house prices in Dubai fell slightly, according to the Colliers International Dubai House Price Index for the second quarter of 2010, published today. The index recorded a 4 percent decline in house prices since the first quarter of this year, the first quarter-on-quarter contraction in twelve months.

The index fell 5 points. The index dropped 5 basis points from 119 points in Q1 to 114 in Q2, with the median price of homes reaching AED 1,014 per square foot (AED 10,915 per square meter) in Q2, down from AED 1,061 per square foot (AED 11,420 per square meter) in Q1.

Despite the decline in the first quarter, the index fell 5 basis points from 119 points in Q1 to 114 points in Q2. Despite the decline in the second quarter, the index still shows a 7 percent increase in overall house price values year-on-year compared to the second quarter of 2009. However, Colliers International warns that the upcoming increase in the number of homes on offer, coupled with lower rental income, is likely to put pressure on house prices, pushing them down further in the coming period.

Ian Albertson, Managing Director of Colliers International, said <Ian Albert, regional director of Colliers International, said a 4 percent decline in the second quarter of this year is “a relatively modest change compared to the extreme volatility of the index between 2008 and 2009, when it showed a 50 percent increase in house prices before falling back to 2007 levels,“ adding: ”In the past 12 months we have seen the index move within 1.8 percent of its average index value of 115 points, indicating some stability over the past year. However, we expect a further slowdown, as ongoing concerns about putting more homes on the market will prevent further recovery.“

Albert added. <Colliers International, the global real estate consultancy, expects around 33,000 residential units to hit the market by the end of 2010, down from its previous estimate of 41,000 units, following delays and rescheduling of a number of projects in Dubai. Given Dubai's track record so far, a significant number of these units may be delayed until 2011.

Albert said. Albert noted that there are over 340,000 residential properties in Dubai, with an occupancy rate of 87 percent, and he expects this rate to decline: ”The market cannot absorb the additional numbers of units unless the population increases or slows the entry of these new units into the market.“

Albert noted that there are more than 340,000 residential properties in Dubai, with an occupancy rate of 87 percent, which he expects to decrease. <The situation is exacerbated by falling rents in the emirate. Dubai's saturated residential market contributes to the more than 50 percent drop in average rental prices since 2008, which discourages ownership. ”While this is good news for tenants, the potential drop in income from residential rental properties negatively impacts the market value, making them less attractive to investors, which will be another factor to monitor in the coming quarters,“ Albert said.

Albert commented on this point by saying that ”while this is good news for tenants, the potential drop in income from residential rental properties negatively impacts the market value, making them less attractive to investors, which will be another factor to monitor in the coming quarters. <The index, compiled using real mortgage transaction data from a range of financial institutions, showed a 15 percent increase in the number of transactions in the second quarter of 2010 compared to the first quarter of the same year. Colliers International says that despite this increase, the market is still experiencing sluggish demand, which, as in the previous quarter, is mostly concentrated in the end-user and geared towards existing residential projects with completed infrastructure and amenities.

Colliers International believes that the number of transactions increased by 15 percent in the second quarter of 2010 compared to the first quarter. "Banks are still cautious and selective in real estate financing, often providing mortgages to completed projects and borrowers who have gone through rigorous approval processes," Albert said.

Albert believes that "banks remain cautious and selective in real estate financing.