DUBAI, (Reuters) – Dubai’s property prices are expected to drop by another 20 percent as more projects come online, adding to an already flooded market where demand is dwindling, an executive at research firm Colliers International said.
Dubai’s real estate sector has been hit hard by the economic crisis, which has seen property prices drop by 48 percent since last year, JP Grobbelaar, director of research and advisory at Colliers International, said on Wednesday.
“Prices will only level out once the demand exceeds supply… but a further reduction in prices by 20 percent in the residential sector is not unrealistic,” Grobbelaar told a news conference on Collier’s report on the Dubai real estate market.
Seventy-one percent of the 23 developers surveyed by Colliers at the region’s main industry exhibition Cityscape this month said they believed the Dubai market had yet to bottom out.
The collapse in prices since the global financial crisis brought the region’s economic boom to an end a year ago, has forced developers in the once booming city to put major projects on hold and to lay off thousands of staff.
Grobbelaar said there was currently a 25 percent oversupply in the residential housing market.
“There is certainly a concern about oversupply in the market. Right now there are around 340,000 residential units and in two years there will be an additional 34,300,” he said.
“Unless there is significant growth in population over the coming two years, we expect the oversupply to remain in the foreseeable future.”
He said that things would be no better in commercial real estate, with office space in the emirate expected to grow by 100 percent between 2009 and 2010.
“In the commercial sector we expect the price drop to be even worse and we don’t see any economic drivers that will cause the prices to increase.”
He did not say when the market was expected to recover, only that it would take time.
“When the recovery starts, it’s going to be a long and slow recovery,” Grobbelaar said.
Dubai’s six-year property boom came to a halt late last year, with delays and cancellations of multi-billion dollar development projects.
The emirate is home to a number of iconic real estate projects including developer Nakheel’s three palm-shaped artificial islands, of which only one is finished, and a cluster of islands in the shape of a world map, where development has been put on hold.