Residential real estate prices in Dubai are increasing for the first time since the economic downturn but opinion is divided over whether the rebound is sustainable.
Dubai real estate prices rose 7% in the third quarter from the previous quarter on increased availability of mortgage financing and a perceived increase in job security among expat workers, according to a report from Colliers.
While another report from HC Securities & Investment indicates that prices bottomed out in April and have since risen by 9%.
‘The Q3 results indicate a bounce in the market but we will have to wait for the Q4 results before we can say whether an underlying growth profile exists, indicating a potential recovery,’ said Colliers regional director Ian Albert.
The report also shows that despite the bounce prices were 47% lower than in the same period a year ago and Colliers predicts that the volume of new units expected to come onto the market in 2010 will dampen prices although sought after property will fair the best.
‘Well planned mature developments in good locations, supported by facilities and community infrastructure will receive relatively higher demand. This demand ensures a lower risk profile for banks, which ensures the availability of finance to support demand further,’ said Albert.
The analysts though at HC Securities & Investment believe that the impact of new units coming on line next year will not be as hard as the volume has been overstated. The company believes around 60,000 units will hit the market by the end of 2011, compared to other analyst estimates that range between 90,000 and 140,000.
It believes that the rebound is sustainable thanks to improved investor sentiment and risk appetite, a negative real interest environment and attractive rental yields.
Mortgage values and volumes have recovered to pre-crisis levels, reaching 24% and 14% of total transaction values, respectively, in October this year, compared to 7% and 6% in April, the report points out.