EFG Hermes - Dubai Property Market Slump Until 2011

EFG Hermes said that property prices in Dubai have been falling since September 2008 and a recovery will not happen until 2011.

Ms Sana Kapadia, analyst at EFG Hermes said that "We don’t really have an understanding of the full extent of how bad the current picture is, but from our own pricing index we have seen price declines starting in September 2008."

She added that real estate prices in Dubai could begin to pick up in 2010 if liquidity and investor confidence return to the market, but may remain depressed until 2011.

The fall in EFG’s Dubai Residential Pricing Index includes both off plan and completed properties, continued in October 2008 and November 2008. Since September 2008, data collected by the investment bank suggest prices have come down between 1% and 2% per month, but the real fall is likely to be much steeper.

Ms Kapadia further said that "Everything tends to be quite anecdotal. We’ve only begun to hear about developers beginning to scale back on projects and speculators turning away from deposits. If prices come down 15% to 20% that still doesn’t make them extremely affordable for the bulk of the addressable market. We have to see how developers cope with bringing new product to the market."

Earlier EFG Hermes had predicted a peak in Dubai real estate prices by mid 2009, followed by a 15% to 20% slump in prices by 2011.