Tuesday, April 28, 2009

Dubai home prices drop 41 pct in 1Q

Home prices in the once red-hot Middle East boomtown of Dubai plunged 41 percent in the first three months of 2009 as the global economic slowdown raised concerns about job security and dried up financing, according to figures released Tuesday that suggest nearly two years of gains have evaporated.

The drop in the home price index compiled by real estate consultancy Colliers International marks the first consecutive quarterly decline and the first year-over-year slide since Dubai's property boom began earlier this decade. «The heat has gone out the market completely,» Colliers Middle East Chief Executive John Davis said in an interview.

Dubai has staked much of its reputation on attention-grabbing property developments including the world's tallest skyscraper and a near-empty archipelago resembling a map of the world. Many of the city-state's real estate developers have strong ties to the government and rely on foreign workers, who send billions of dollars back home to families in Asia each year.

Colliers' index, compiled with six local and international banks, measures prices in parts of Dubai where foreigners have been allowed to buy since the market was opened in 2002. Those areas were largely responsible for Dubai's real estate boom. The 41 percent drop from the previous quarter is the second decline in a row.

Colliers reported an 8 percent drop in the last three months of 2008, which the company described as likely the first decline since the boom began.

The research firm cited several reasons for the decline, including some such as a lack of financing and worries about job security that have become common throughout much of the world.

Other factors were more specific to the Dubai market, where citizens account for only 10 percent of the population and typically already own their homes.

Colliers noted that a number of developers failed to provide sufficient details about their projects, creating an «information void (that) was quickly filled with negative market rumors.

At the same time, investors enticed by low down payments in earlier years rushed to sell their holdings before final payments of as much as half the purchase price came due. People looking to buy homes to live in _ known in the industry as «end users» _ are now largely staying on the sidelines.

«We're dealing with a completely different market,» Davis said. «The speculators have all gone. The end users are extremely limited. ... The expatriate community is extremely concerned about employment prospects.

Year-over-year, prices dropped 34 percent in the first quarter. Colliers' index is now about where it was in the second quarter of 2007, and little higher than in the first part of that year.

Davis said prices are likely to continue falling, though not as sharply as in the first quarter. He said it was too soon to predict when the market would hit the bottom.