Property Prices in Dubai : Beware the Spin Doctors

The ongoing financial crisis has hit Dubai hard and the rather silly approach being taken by the authorities is to pump out press release after press release claiming that there is not a problem. We have gone through phases with these press releases. First - there was no problem and Dubai was immune to the downturn. Then, Dubai was affected, but only slightly, next up - OK, Dubai has a problem, but we are now at bottom.

There is only one word to describe these press releases, advertorials and outright lies coming from the developers, the government and the media - which - in the UAE is owned by the ruling classes and very much not a free press. And the word is Bollocks.

Sadly, we are now in the fourth phase which is - "prices jumped xx% last week/month/year, signaling a return to boom times!"November 3rd, we reported that property prices in Dubai had jumped 7%.

Dubai property prices have risen for the first time since the market crashed last year , up 7 per cent in the second quarter as demand revived and lending conditions eased, consultancy Colliers International said. Property prices in Dubai up 7%

In October, we were able to report that Dubai property prices rose 30%.

Property owners in Dubai have been increasing the asking price for their properties in the past two months and some areas have witnessed appreciation of 20 to 30 per cent in the past few weeks. Dubai property prices rise

Both of which were utter bullshit. The latest "news releases," this week have similar headlines:

Completed properties see a rebound in sales, says Emirates 24/7 and go on to spend the entire article pointing out that off-plan sales have collapsed completely as a model.

Completed properties are starting to show signs of life while off-plan sales have become "unsustainable", according to a property developer. "Off-plan property sales have proved to be unsustainable. Sales enquiries for off-plan properties have been stagnant now since the third quarter of 2008 – completed properties are, however, starting to show signs of life," said Mohammed Nimer, CEO of MAG Group Property Development. Emirates 24/7

At the same time, the claim that, UAE economy to see sharp rebound in 2010, which is odd, seeing as there was never a downturn.

Lower oil production will ally with slowing construction activity to try and depress the UAE economy in 2009, but the economy is expected to rebound by nearly four per cent in 2010, the Economist Intelligence Unit (EIU) said yesterday. In a statement sent to Emirates Business, the London-based information unit said it had cut its earlier forecasts about the contraction in the UAE's gross domestic product (GDP) this year from four to 3.5 per cent following an improvement in oil prices and expected rise in the country's crude output. 24/7

A few days before, Secondary Market Prices in Springs and Meadows Surge, according to Zawya

Secondary market prices of properties in the Springs have increased in the range of 11-33 per cent since the beginning of this year, while prices in the Meadows have surged in the range of 16-19 per cent in the same period, according to a real estate firm. Vineet Kumar, Head of Sales, Asteco said: "In Springs, two-bedroom villas currently sell for Dh1.5 million onwards, up 36 per cent from Dh1.1m at the beginning of this year. Three-bedroom villas start from Dh2.8m from Dh2.6m in January.In the Meadows, current prices for four-bedroom villas start from Dh3.8m, up 18.75 per cent from around Dh3.2m at the beginning of the year. Five-bedroom villas, meanwhile, are around Dh4.4m now, up 16.5 per cent from Dh3.8m on January prices." Zawya

All this does is serve to confuse the market and persuade smaller investors they would be better served looking to a more mature market, because the latest UBS forecast suggests Dubai property prices will fall another 30% and may take as much as ten years to "rebound," and the market will be as much as 25% over supplied throughout 2010.

“We expect it will take at least a decade for property prices to return to previous peak levels, and see only modest growth in real estate asset prices subsequent to the market trough in 2011." UBS reiterated its view that the emirate’s population will shrink by 8 percent this year and by 2 percent next year, based on the assumption that nearly 50 percent of the workforce is employed in real estate or construction, where it said 70 percent of all projects have been delayed or cancelled. Arabian business

Much like the UK housing market, sales volumes are so depressed that it is impossible to draw any price data. The government Inc has been pouring money into the developers to allow them to hold property rather than sell at distressed prices. How long it will take for this excess to work through the system is anyone's guess - but ten years sounds about right.