Dubai house prices, which halved since mid-2008, may drop another 15 per cent to 20 per cent this year on an increase in supply as more real estate projects are completed, Credit Suisse Group said. “We expect residential prices to decline by another 15-20 per cent in Dubai as the oversupply gap peaks in 2011,” Dubai-based analyst Ahmed Badr wrote in a report. “We expect Abu Dhabi’s residential prices to come under pressure as new supply comes online, thus narrowing the price gap with Dubai despite the continued supply shortage and the strong replacement demand.”
Residential rents in Dubai are set to fall further in 2010 due to increased supply, while vacancy rates in Abu Dhabi’s office market are expected to rise to as much as 10 per cent in 2011, according to another report earlier this week. Real estate services company CB Richard Eliis (CBRE) said it expects 31,194 new homes in 2010, 29,388 in 2011 and 21,870 in 2012. However house prices in Dubai rose on average by two percent in the first quarter of 2010 compared to the same period last year, according to the latest house price index released by Colliers International in May.
Colliers International’s Q1 2010 House Price Index also found that average prices rose four percent since the last quarter of 2009, the third consecutive quarter to register positive growth. The average house price for Q1 2010 was around AED1,061 ($288.85) per square foot, compared to AED 1,022 ($278.23) in the fourth quarter of 2009. Meanwhile, Sorouh Real Estate, Abu Dhabi’s second-biggest property developer by market value, was lowered to neutral from outperform at Credit Suisse Group, citing concern about funding and low project visibility, according to a Bloomberg report on Thursday.
The 12-month share-price estimate was cut to 2.33 dirhams from 3.43 dirhams, the newswire said. The company’s estimated 2 billion dirhams ($545 million) of gross cash may be used by the end of this year and it will have to raise between 3 billion dirhams and 4 billion dirhams from debt sales to finance existing projects, Dubai-based analysts Ahmed Badr and Hans Zayed wrote in an e-mailed note. “The market is almost pricing in the value of all projects under construction and hence we believe the stock to be fairly valued at this stage given current financing concerns that we believe have put pressure on future development projects,” they wrote.
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