Is Dubai Really Starting to Stabilize?

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After posting a 50 percent drop in valuations in the last two years, Dubai' residential market is ready to embrace any sign of good news.

So when Colliers International this week reported a two percent increase in prices in the first quarter of 2010, many embraced the report as a sign prices may be stabilizing. The modest bump was the first year over year increase since 2008.

But the real meat of the Colliers report was far more depressing.


By the end of 2010, another 41,000 residential units will come on line in the market, further exacerbating the oversupply situation, Colliers says. Although most of the new units are in the low to moderate price range, there is no way the market can absorb them all in the next year.

Thanks to the glut, "it is anticipated the index will experience fluctuations in value going forward," Colliers' regional Director Ian Albert said in the report. "Demand is not expected to match the growth in supply, creating downward pressure on property prices."

However, there is some hope in the breakdown of different residential categories. Apartment prices actually gained a robust 6 percent in the first quarter, and villas rose two percent, Colliers found. But the market was dragged down by townhouses, which slipped another 4 percent.

With banks still reluctant to lend to anything except completed or near-completed project and only to buyers who can meet "the strict lending criteria," there has been a change in the type of product selling, Colliers says.

"The change of demand from speculative investors to end-users places more importance on the 'livability' aspect and there will be better demand and greater stability for projects that offer a community lifestyle," the report concludes.

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