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Get real, Part I
With the grinding halt of the real estate rollercoaster, exhilaration at the prospect of a ‘fast buck’ is over. What’s next for the industry? Part I.
October 27, 2009 3:15 by Ehtesham Shahid
A Moody’s global report in July said the Dubai residential property market generally remains oversupplied. “Large-scale lending has not resumed and property developers have recorded a number of buyer delinquencies,” it said. According to the report, although the decline of residential real estate prices has slowed, there is a near-term risk of further declines if expatriates leave Dubai after the end of the school year and the seasonal summer/Ramadan slowdown. It also maintained that “oversupply in the market is unlikely to be resolved within the next 12 months,” given the dynamic supply-demand developments, which could result in prices remaining sluggish or falling further, albeit at more moderate levels than over the past nine months.
However, the most telling projection came earlier in the year from UBS, whose proprietary model suggests a decline in Dubai’s population in 2009-10, a critical component of the demand-supply equation. The model suggests Dubai’s population would decline 8 percent in 2009 and another 2 percent in 2010, should both the construction and real estate workforces decline 20 percent and 10 percent, respectively. “We estimate this may result in a residential oversupply of 27 percent of the current market [of 87,000 units] by 2010, thereby incrementally pressuring home prices,” states the investment research report.