Dubai property market unlikely to see drastic correction – survey

Dubai’s property market is unlikely to see a severe correction similar to the one in 2008, a market intelligence survey by London Business School showed.

The study, which polled more than 200 business executives, examined the possibility of another real estate bubble in the emirate’s property sector.

But about 84 per cent of respondents in the survey said that they don’t expect Dubai’s property prices to plunge in the way they did during the 2008-2009 correction.

“Only 3 per cent of those surveyed expect an annual decline larger than 20 per cent,” said London Business School’s professor of finance Joao Cocco.

Dubai’s property market, which rebounded strongly in 2013, has dampened in the recent months due to additional supply and volatility in the UAE’s equity markets and lower oil prices.

House prices in the emirate fell 0.8 per cent in the first quarter of 2015, leaving average prices 0.5 per cent lower than a year earlier and 19.4 per cent below the 2008 peak, according to a report by real estate consultant Cluttons.

Around 50 per cent of the respondents in the London Business School survey also expected prices to drop in the future.

Just over half (51.5 per cent) of those polled thought that any losses or gains in the Dubai property market will be within 10 per cent of current values.

Meanwhile 31 per cent said that they expect the prices to decrease by less than 10 per cent and 20.5 per cent predicted an increase below10 per cent.

“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,” said Cocco.

“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.”

But despite the gloomy market outlook, almost half of the respondents said that they would invest in Dubai’s property market.

More than a third cited Dubai’s strong economic growth potential as their main reason for investing. Other reasons included high rental yields and personal reasons, including the high quality of life in the UAE and preferring to purchase instead of renting.