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Iceberg, right ahead!
The real estate market seems to been taking on water, but what can be done to prevent from completely sinking? Life belts at the ready…
January 24, 2011 3:09 by Eva Fernandes
When Kipp thinks of the troubled real estate sector of Dubai, we are reminded of that scene in Titanic during which the ship’s string quartet play soulfully as the ship slowly but surely sinks into the Atlantic. The band continued to play to keep the passengers calm and to facilitate an orderly exit to the limited life boats.
Okay, so Titanic was probably not the cheeriest analogy to use, but it seemed a good way to start, and you get the point.
Though the trouble Dubai real estate is in may not yet be of Titanic proportions, it sure has hit an ice berg. Khaleej Times reports today that, counting the 25,000 new units expected to be ready in 2011, the total stock of residential units available will amount to 335,000. And things aren’t going to get better any time soon; property consultancy firm Jones Lang Lasalle says “Although there are recent pockets of stabilisation for Dubai’s higher-end residential product, housing market will continue to experience a situation of oversupply and prices are not expected to recover before 2012.” We’re still taking on water folks.
An interesting perspective on the issue was highlighted by an article in the Gulf News this week that points out that investors are less likely to try and sell their property because the very real gap between the asking price and the achieved value is widening. In 2009, the gap between asking and achieved prices was estimated to be around 10 percent, but recent figures released by Jones Lang LaSalle suggest that figure went up to 15 percent in 2010. And the current situation is only anticipated to get worse as new supply arrives.
Could the government take a more proactive stance to help the recovery? We’re not sure. But it has to be said that many parts of UAE real estate legislation are both a source of frustration for current investors and a deterrent for potential future investors.
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