No ‘drastic’ plunge seen in Dubai property prices, says poll

Jerusha Sequeira

9 years ago

Dubai property prices are unlikely to plunge as drastically as they did during the financial crisis, according to a recent poll of business executives.

Eighty-four percent of respondents to a marketplace intelligence survey by London Business School said they didn’t believe the property market would plunge in the same way it after the global downturn that began in 2008, which prompted price declines of more than 50%.

The survey questioned over 200 business executives, to analyse Dubai’s property market and the possibility of another real estate ‘bubble’.

“The vast majority of executives surveyed do not believe that there will be a drastic decline in residential real estate prices in Dubai over the next 12 months. Only 3% of those surveyed expect an annual decline larger than 20%,” said Joao Cocco, a finance professor at the London Business School.

The news follows a June forecast by global ratings agency Standard & Poor’s, which said Dubai property prices are set to fall by up to 20% by early 2016.

Despite speculation among some that another bubble is set to burst, nearly half (47%) of the respondents to the poll said they would invest in Dubai’s property market, London Business School said in a statement.

More than a third of the respondents felt that greater restrictions on real-estate supply would help limit market speculation. Tighter eligibility for home finance loans would also help, according to 18% of the survey participants.

“Roughly half of the executives surveyed recognise the risk that the supply of new properties will increase at a faster rate than the demand, leading to a situation of over-supply and a decline in real estate prices,” Cocco said, noting that the respondents would favour greater restrictions on construction as a way to mitigate this risk.

The executives polled by London Business School were almost equally divided on whether property prices would move upward or downward, with just over 50% saying they would decrease, and 49.75% saying prices would remain stable or increase. However, more than two-thirds (68%) predicted that Dubai’s residential market would not continue to grow at the same rate as it has so far.

“It is reassuring to see that more than two thirds of respondents do not believe that property prices will keep on increasing at the same rate in the future. Unrealistically high expectations of future house price growth have in the past been a source of booms in the housing market, only to turn into bust when expectations change,” Cocco noted.

According to Knight Frank’s Global House Prices Index, Dubai was one of the worst-performing housing markets in the first quarter of 2015, ranking 53rd out of the 56 locations monitored – one place lower than Greece, but higher than China, Cyprus and Ukraine. The report revealed that property prices in Dubai fell by 6.1% over a 12-month period, and were 3.7% lower than the previous quarter.