Dubai property price boom draws towards an end

Dubai has a demand for 40,000-50,000 residential units per year, with 69,000 units to be delivered in 2007, said EFG Hermes' 2006 forecast, a figure revised this autumn to 25,000.

More alarmingly the 2006 report said that in 2008 some 139,000 units were due to be handed over, although delivery dates next year were even more likely to slip than in 2007, as only 14 per cent of these units will be completed by large developers, compared with 75 per cent in 2007. The landmark EFG Hermes' 2006 report looking at property in the region found that a period of stability in 2007 would be followed by a cumulative 25-30 per cent fall in values by 2010, albeit the range of potential price decline outcomes is very wide. The major caveat is that this analysis is predicated on there not being any significant slowdown in the economy which would weaken the flow of expatriates into Dubai. So if oil prices came unstuck in the forecast period, the outlook would be very different.

Developer optimism

When the report came out, local property developers generally took no notice, but there was a slowdown in new schemes, particularly after the massive final rush of new projects at last year's Cityscape trade show. One thing that certainly kept the property boom alive into 2007 was the continual delays to major projects, such as the Jumeirah Beach Residence and The Palm, Jumeriah. In practice, it was still hard to find completed accomodation to buy or rent in early 2007. EFG Hermes revised its 2007 completion prediction to 25,000 units in autumn 2007, and saw prices rising moderately until a belated correction in 2009 mainly due to delivery delays. Yet local developers continued to roll out new projects until the summer. There was a change in focus with ultra luxury, high-rise condominiums and high-end villa communities coming to the fore, while commercial property launches in the Business Bay kept on rolling.

Sky high ambitions

It is a notable feature of global property booms that the most ambitious projects usually come late in the cycle, and of course reflect the then very high land values. Another common feature is the building of super tall buildings and Dubai is set to have the world's tallest building, The Burj Dubai. At the time of writing, the market is still booming with participants anticipating a lively autumn once Ramadan is over. No less than five more super-tall buildings, not including the Burj Dubai, are on the drawing board or at the foundation stage. In fact property rentals continued to rise in the summer of 2007 even if capital values seemed to have levelled off since the spike observed in September 2006. The general belief is that after a five year run, the Dubai boom is almost over with modest price rises until a decline in 2009, or at least that is EFG Hermes' view.